"Money market mutual funds are the lowest-risk variety of mutual funds, but they are not risk-free." Discuss.

Money market mutual fund (MMMF) is a scheme of a mutual fund set up with the objective of investing exclusively in money market instruments. Money market funds are regarded as high liquidity oriented as investor attaches more value for safety and liquidity. MMMFs are exclusively governed by SEBI (Mutual Funds) Regulations, 1996 w.e.f March 07, 2000. MMMFs are the lowest-risk variety of mutual funds, but they aren't risk-free. The risks associated with MMMFs are as under: MMMFs are subject to market risks and do not have any risk cover like "Deposit Insurance and Credit Guarantee Corporation" for upto ₹1,00,000 (Rupees one lakhs only) against defaults by banks in India. Negative returns: Over a period, Money Market Mutual Funds can result in negative yield to the investors in real value if inflation rate is higher than the risk free rate of return. While Money Market Mutual Funds generally invest in government securities and other vehicles that are considered comparatively safe, they may also take some risks in order to obtain higher yields for their investors. So, in order to try to capture another tenth of a percentage point of return, it may invest in bonds or commercial paper that carry additional risk. Expenses charged by Money Market Mutual Funds can result in fall in returns to the investors: Being relatively safe investments, the returns on Money Market Mutual Funds are lowest and even a small annual fee can substantially reduce the profits on such funds. This may make it even more difficult for money market investors to keep pace with inflation.