Investors looking to put their savings in money market funds still face a degree of risk, experts have pointed out.
Money market funds might not be as safe an option for investors as they initially seem, the Times reports.
With the continuing volatility on the equities markets being experienced due to the credit crunch, money markets have become more popular. However, according to industry experts, many consumers are putting their savings into the money markets due to the misguided belief that they are "risk free".
Moreover, this error could be widespread: according to the Investment Management Association (IMA) retail sales tables, investors put £136.5 million into the funds in April alone.
Commenting on the trend, Tony Ahearne at research firm Moneyspider.com said: "It is crucial to recognise that these are not simply cash schemes but currency-based funds that are exposed to market volatility. It is crucial for investors to be aware that money market does not mean no risk - it is quite the reverse."
Mark Dampier at Hargreaves Lansdown added that some forms of money market funds were "riskier" than others and that, overall, "you are not talking about building society risk" when it comes to the funds.
Figures from Moneyspider.com show that the largest money market fund in the UK, managed by Threadneedle, has lost three per cent of its value over the past year due to the credit crunch.
Compare savings accounts via money.co.uk
