Mutual Fund Site

Cash equivalent funds offer the greatest safety and security of capital. These mutual funds will invest in a variety of high quality and often government issued securities. Because there is a huge element of security associated with these securities, there is very little risk to the investor. This makes cash equivalent funds (or money funds as they also known in the industry) an attractive parking spot for investments when equity markets and fixed income markets alike are in turmoil.

For the most part, money funds will pay negligible amounts of interest (if any at all) and in a technical sense could “lose” money for investors in instances where low returns do not exceed the expenses incurred within the fund.

At the Mutual Fund Site, we do not review money funds at this time as we see them as cash. Highly liquid and not intended to be a substantial part of anyone’s long-term investment plan. At the same time, cash and cash equivalent funds are an essential part of a portfolio as it allows investors to average down when investments fall in value (such as in a period of a market correction, which is often an “over-reaction” to bad economic news and does not necessarily represent the fundamentals behind the individual securities).

Conveniently, almost every equity and income fund will hold a small amount of cash in their portfolios. This means that even balanced or moderately aggressive investors need not set aside a dedicated amount in cash, though most investors will often accumulate their regular contributions in a cash equivalent fund.

Beyond this, we do not anticipate further elaboration into cash equivalent mutual funds.