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Bond Basics 1: What is a Money Market Fund?

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Should you choose a money market fund or a bond fund? Or perhaps dividend-paying stocks? Learn how each of these differ in this episode. Visit http://www.FinancingLife.org for the transcript and learn what every investor should know about bonds and fixed-income securities. Don't forget to LIKE, COMMENT, and SUBSCRIBE for more videos like this! http://www.youtube.com/subscription_center?add_user=FinancingLife101 SUBSCRIBE TO OUR EMAIL LIST! http://financinglife.org/subscribing/ ABOUT US: We're a not-for-profit educational site to help YOU find and understand time-proven investing wisdom and to build an all-weather portfolio. This common sense investing philosophy is also known as the Bogleheads Investment Philosophy, endearingly named in honor of John C. Bogle, the champion of common sense investing.
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Text Comments (23)
SayGudday (2 months ago)
EXCELLENT. Thank you so very much for sharing this simple explanation with us all. You have just earned another subscriber. Keep these coming, please!
FinancingLife101 (2 months ago)
Thank you SayGudday. :-)
FinancingLife101 (2 months ago)
Thank you SayGudday!
tsunami (3 months ago)
Undervalued video. Reddit meme buy buy buy
Tokersah (5 months ago)
I'm new to all of this but I have a question or 2. When you invest money into a money market fund, does the money market fund then invest in short-term securities or does the investor invest in short-term securities into the money market fund? I'm confused.
Tokersah (5 months ago)
Ok thank you so much for the help.
FinancingLife101 (5 months ago)
I'm happy to help. I also have both free and inexpensive classes at https://academy.financinglife.org. A very excellent forum is bogleheads.org -- many generous talented people and a helpful moderated environment.
Tokersah (5 months ago)
Ok thank you and do you know any good places or a website where I can ask questions on finance if I have any? dont want to always waste your time.
FinancingLife101 (5 months ago)
No. A short-term bond fund is a different choice than a money-market fund. You choose one or the other. You don't do one "through" the other. A money market fund guarantees that the value of your investment won't change with daily interest rate changes — but the interest that the money market fund will give you does vary with the interest rate in the market. Bonds (and bills, CDs, etc) do the opposite: they guarantee they will pay you a fixed interest rate in return for using your money, but the value of that loan (i.e. investment) changes when interest rates rise or fall. Use a money market fund as a place to put your cash for a short-term. If you won't need that money for a year or two, you'll get a better return if you use a short-term bond fund. And if you won't need that money for several years, consider an intermediate term bond fund.
Tokersah (5 months ago)
Ok, but when you said MMF invests in short-term securities does that mean that the investor is basically the one wanting to invest in short-term securities and also when you invest in a short-term bond fund do you have to do it through MMF?
Tom Oakes (6 months ago)
This is great. Just purchased your book on bonds. Thank you
FinancingLife101 (6 months ago)
Thank you Tom. Send me a note if you have any remaining questions after you read it.
NBT 23 (10 months ago)
FinancingLife101 (10 months ago)
You are welcome! In most ways, bonds are much simpler than stocks so it is unfortunate that many find them confusing. They are essential because they are the way we control our overall investment risk. So welcome aboard. Find more over at https://financinglife.org and please let me know if there are any specific areas that you would like me to cover or explain better. All the best to you, Rick
FinancingLife101 (10 months ago)
My pleasure NBT23. You'll find more over at https://academy.financinglife.org
John Ward (1 year ago)
This guys cracks me up!
definitelynot cuervo (1 year ago)
keep up the good work !
FinancingLife101 (1 year ago)
Thank you! And all the best to you as well :-)
Kirandeep Kaur (2 years ago)
Jordin Turkington (2 years ago)
Brilliant explanations and a very friendly and welcoming vibe! Subscribed for sure!
FinancingLife101 (3 years ago)
Thanks for your comment David.  This is just the first in a series and it attempts to point out the difference between securities that make stable interest payments (like bonds) and securities that maintain a stable principal value (like your high yield saving account, or a money market fund). It's useful to learn the difference before deciding which fits your needs. Thanks for watching and for your comment.

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