What are the Risks Associated with Prime Money Market Funds?
1. Market Risk: While rare, the NAV of a money market fund can fall below $1, a situation known as "breaking the buck." 2. Interest Rate Risk: Changes in interest rates can affect the yield of the fund. 3. Credit Risk: Although these funds invest in high-quality instruments, there is always a risk of default by the issuers. 4. Liquidity Risk: In times of financial stress, liquidity can become an issue, impacting the fund’s ability to meet redemption requests.