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Money Market Funds

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What is a money market fund?

Money market fund is also called a liquid fund. They invest in money market instruments such as treasury bills, commercial paper and certificates of deposit with a maturity term under 91 days. They also invest in short term debt which matures in a time period under a year.

Returns from the money market fund

Money market funds give good returns, in times of high inflation. When RBI raises rates or keeps them high, Money market funds give good returns.

Why invest in Money Market Funds


These funds are extremely liquid. You can buy and sell them within a day. You are not charged an entry or an exit fee.

A Good Saving

You can keep your extra cash in a money market fund and earn higher interest than a savings bank account.


Safer than most debt funds. They invest in fixed income securities with very short maturity. Low on risk.


Dividends are tax free in your hands. The profit you make in the long term is taxed with an indexation benefit.

Types of money market funds

Money market funds come with different plans. You have the growth plans, daily dividend plans, weekly and even monthly dividend plans. Growth plans do not give you any dividends. You can also invest in direct plans which have a lower expense ratio as there are no intermediary charges.

Taxation of money market funds

Short term capital gains (gains under 3 years), are added to your taxable salary. Taxed as per income tax slab you fall under. Long term capital gains (gains over 3 years), are taxed at 20% with indexation.


Concepts & FAQ's Money Market Funds

What is a Money Market Mutual Fund?

In a Money Market Mutual Fund, the money is invested high-quality and very short maturity-based "money market instruments/securites". The maturity ranges from overnight to one year. These securities that are invested in are are deemed to be close substitutes of money.

Money market securities/instruments (Treasury bills, Call money, Commercial paper, Certificates of deposit etc.) are issued by governments, financial institutions and large corporations to raise money. The investor that buys these financial instruments/securities effectively acts as a lender who is entitled to interest at the time of repayment/maturity. Money Market Securities are traded in very high denominations. This limits access for the individual investor. The easiest way for us to gain access to the money market is with a Money Market Mutual Fund.

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Difference between "Debt Mutual Fund" and "Money Market Mutual Fund"

The very short term maturity period of Money Market Mutual Fund is its main characteristic. The investment in Money market Mutual Fund is done in money market securities (that matures in less than one year) compared to Debt Mutual Funds that invest in bonds which also gives assured returns but the maturity period is relatively higher. Money market investments are also called cash investments because of their short maturities.

For what kind of investors is Money Market Mutual Funds suitable?

Money Market Mutual Funds are a safe investment. You won't get great returns, but you won't have to worry about losing your principal. A money market mutual fund's purpose is to provide investors with a safe place to invest easily accessible cash-equivalent.

Frequently Asked Questions

What is the Money Market?

The Money Market is basically concerned with the issue and trading of securities with short term maturities or quasi-money instruments. The Instruments traded in the money-market are Treasury Bills, Certificates of Deposits (CDs), Commercial Paper (CPs), Bills of Exchange and other such instruments of short-term maturities (i.e. not exceeding 1 year with regard to the original maturity)

What is Call Money Market ?

The call money market is an integral part of the Indian Money Market, where the day-to-day surplus funds (mostly of banks) are traded. The loans are of short-term duration varying from 1 to 14 days. The money that is lent for one day in this market is known as 'Call Money', and if it exceeds one day (but less than 15 days) it is referred to as 'Notice Money'. Term Money refers to Money lent for 15 days or more in the InterBank Market.

What are different money market instruments?

Money market instruments include call money, repos, T-bills, commercial paper, certificate of deposits and collateralized borrowing and lending obligations

What is Commercial Paper (CP)?

Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note.

What are T-bills?

Treasury bills are actually a class of Central Government Securities. Treasury bills, commonly referred to as T-Bills are issued by Government of India against their short term borrowing requirements with maturities ranging between 14 to 364 days. The T-Bill of the following periods are currently issued by Government/Reserve Bank of India in Primary Market : 91-day, 182-day and 364-day T-Bills. All these are issued at a discount-to-face value.

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Money Market Funds Articles

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Know Everything About Money Market Mutual Funds?

20 January 2020, Monday    

Money Market Mutual Funds (MMMF) are schemes that invest in short term debt instruments, cash and cash equivalents that are of high quality. Because of this, money market mutual funds are considered as high quality instruments with low risk. They have a predictable return rate. Want to know more ....

What are Commercial Papers? Advantages of Commercial Paper

02 December 2019, Monday    

Let’s take a look into one of the most popular forms of debt instruments introduced by the Indian government post the liberalization of the economy. What are Commercial Papers? A commercial paper is an instrument of the money market containing a short term maturity. Commercial papers com ....

The Advantages of Money Market Funds

10 October 2019, Thursday    

If you are looking for less risky options to generate better returns within a short term then money market funds can be the best solution. You can maintain liquidity as well as grow your money conveniently through the money market funds. Want to know more on Mutual Funds? We at IndianMo ....


Money Market Funds News

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Cabinet approves launch of Bharat Bond ETF

Wednesday, December 4, 2019, 6:06 PM

The Cabinet today approved the launch of the Bharat Bond Exchange Traded Fund or ETF, which would be the first corporate bond ETF in the country. ETFs invest in a basket of securities representing an index, security or commodity and are traded on the stock exchange like any security listed on the exchange.

Mutual funds add around 5 lakh folios in Aug

Thursday, September 12, 2019, 5:38 PM

The mutual fund industry has added around 5L investors' account in August, taking the total tally to 8.53-crore, amid volatile market conditions. In comparison, the industry had added 10.29L new folios in July. Folios are numbers designated to individual investor accounts. An investor can have multiple folios. The total folio count stood at 8.38L in June, 8.32L in May and 8.27L in April.

Mutual fund SIP collection falls marginally to Rs 8,231 cr in August

Monday, September 9, 2019, 5:38 PM

Mutual fund investors continue to pour in money through SIPs. Mutual funds received Rs 8,230.76 crore via SIP in August, marginally lower than the collections last month, shows Amfi data. In July, mutual funds collected Rs 8,324 crore via SIPs. SIP AUM on the other hand has risen from Rs 2.69 lakh crore in July to Rs 2.71 lakh crore in August.


Money Market Funds Videos

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To become Master in Mutual Funds, watch this video!

To become Master in Mutual Funds, watch this video!

14 Days Ago

Start your Journey to Become Rich with IndianMoney's Financial Freedom App, Download here Android - IOS -   A mutual fund is a type of financial intermediary that pools the funds of investors who got the same objective/ risk-taking capability accordingly invest in several different types of financial claims for example Equity, debts, or other market instruments and gives profits/interest based on the market value or performance of the funds. But not all of us can gain good returns why is it happening? It is all because of a lack of knowledge about Mutual Funds. No worries,  we are allowing being the master in Mutual Funds by watching this video. In this video, C. S. Sudheer has explained in detail about Mutual Funds investment and how to get more profit in Mutual Funds.  
What will happen to your Investments in Franklin Templeton Mutual Funds?

What will happen to your Investments in Franklin Templeton Mutual Funds?

19 Days Ago

  Start your Journey to Become Rich with IndianMoney's Financial Freedom App, Download here  Android -  IOS -   Due to the coronavirus crises, US-based Franklin Templeton closed six of its debt schemes effective from April 23, 2020. The schemes that Franklin Templeton Mutual Fund closed include Low Duration Fund, Ultra Short Bond Fund, Short Term Income Plan, Credit Risk Fund, Dynamic Accrual Fund, and Income Opportunities Fund. In this video, Mr. C S  Sudheer has explained everything about the Franklin Templeton Mutual Fund crisis and what will happen to your Investments in Franklin Templeton Mutual Funds. Watch this video to know if you will get back your money. 
Tips to choose the Best Mutual Fund!

Tips to choose the Best Mutual Fund!

20 Days Ago

Start your Journey to Become Rich with IndianMoney's Financial Freedom App, Download here Android - IOS - A mutual fund is a professionally managed investment fund which pools money from investors and invests them in securities such as stocks, bonds, commodities, and short term money market instrument. This is the ideal investment option for investors who do not have much time and knowledge to invest in the stock market. You have to be very careful while choosing a mutual fund as it helps in meeting your future goals. In case you choose the wrong mutual fund, you might face a lot of difficulties in achieving your goals. Watch this video to know how to choose the best mutual fund.  


Money Market Funds Education

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What Is Financial Market?

Saturday, January 19, 2019, 6:00 PM

As the name suggests, financial market is a marketplace where the trading of financial instruments like bonds, mutual funds and shares takes place. It is an arrangement or institution that facilitates trading and where buyers and the sellers aggregate to trade in financial products. The financial market can be classified into the primary and secondary market.

What is a Systematic Investment Plan?

Wednesday, September 5, 2018, 5:28 PM

A Systematic Investment Plan or SIP is a smart and hassle free mode for investing money in mutual funds. SIP allows you to invest a certain pre-determined amount at a regular interval (weekly, monthly, quarterly, etc.). A SIP is a planned approach towards investments and helps you inculcate the habit of saving and building wealth for the future.

What is Net Asset Value (NAV)?

Wednesday, September 5, 2018, 11:19 AM

NAV is the total value of all the mutual funds assets minus the value of all its liabilities per unit. It is the price at which you buy or sell units of a mutual fund. The assets of a mutual fund are securities like equity shares, bonds, commercial papers and debentures. Accrued interest and dividends are also the assets of the Mutual Fund.



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