8.32Overnight funds
1What is it?
Overnight funds invest in securities maturing in 1 day.
2Why does it exist?
The lowest-risk mutual fund category: almost no interest-rate or credit risk, with returns close to the overnight rate.
3Diagram
| Invests in | Suits | Risk | Suggested horizon |
|---|---|---|---|
| 1-day securities | Very short parking | Lowest | 1 day–few weeks |
4Quick revision
- Overnight funds invest in securities maturing in 1 day.
- Risk: Lowest.
- Horizon: 1 day–few weeks.
5Knowledge check
Q1. Maturity of holdings?Show answer
1 day.
Q2. Lower risk than liquid?Show answer
Yes, slightly.
Q3. Good for long-term growth?Show answer
No.
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