InvestorQ : How exactly can I evaluate the money market mutual funds? Is it like evaluating any other equity or debt fund?
Crowny Pinto made post

How exactly can I evaluate the money market mutual funds? Is it like evaluating any other equity or debt fund?

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9 months ago
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While selecting a money market mutual fund, there is normally not much choose between two money market funds. Since most of the money market funds invest in similar short-term liquid instruments, their returns do not differ too much. There are 3 basic rules for evaluating liquid fund.

· Does the Liquid fund come from an AMC with pedigree and a fairly large AUM? Remember, even though liquid funds are low risk products, it is better to stick to the mutual fund industry leaders.

· Keep an eye on the liquidity in the financial markets. If the financial markets become too tight, then it may not be the right time to invest in liquid funds as volatility risk increases substantially.

· Lastly, keep an eye on the past performance. When it comes to liquid funds, returns over a shorter time frame are more relevant than long period returns. While we do caution that past is not indicative of future returns, in case of liquid funds, past returns may be fairly indicative of how returns could pan out.

This can be a very basic model for you to evaluate money market funds.

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