Money market funds primarily invest in what type of securities?

Money market funds primarily invest in short-term debt securities, which include assets such as Treasury bills, commercial paper, and certificates of deposit. These instruments are typically characterized by their high liquidity and low risk, as they are often issued by governments or financially stable corporations. The focus on short-term maturities helps to preserve capital while providing investors with a stable, albeit modest, return.

Investment in short-term debt allows money market funds to maintain a stable net asset value (NAV), usually set at $1 per share, making them an attractive option for conservative investors looking for a place to park cash while earning some interest. The underlying securities in money market funds typically have maturities of one year or less, which contributes to their stability and liquidity.

In contrast, high yield securities, intermediate fixed income securities, and mixed stocks and bonds do not align with the investment strategy of money market funds. High yield securities tend to involve greater risk and longer durations, intermediate fixed income securities generally have maturities longer than one year, and mixed stocks and bonds involve equity investment which does not match the short-term debt focus of money market funds.