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I have a 401K and is currently invested. I have an option to rebalance part of the investment to a Fund called SPAXX https://fundresearch.fidelity.com/mutual-funds/summary/31617H102

  1. Can someone explain what do you mean by Government Money Market Fund?
  2. Is this a Fund to temporarily park the money when there is high volatility in the market?
  3. How this Fund will respond to stocks and bonds?
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Can someone explain what do you mean by Government Money Market Fund?

I looked at the link you provided and pulled the list of:

Composition by Instrument (The makeup of a fund's portfolio expressed in terms of asset allocation and industry and sector diversification.) AS OF 4/30/2021

U.S. Treasury Bills    35.52%
U.S. Treasury Coupons   8.31%
U.S. Treasury Strips    0.02%
U.S. Treasury Inflation-Protected Securities 0.00%
Agency Fixed-Rate Securities     7.15%
Agency Floating-Rate Securities 12.36%
U.S. Government Repurchase Agreements 37.57%
Other Money Market Investments 0.13%
Net Other Assets -1.06%

where : Net Other Assets may include cash and receivables and payables related to open security or capital stock trades.

This a a Money market account that is expected to invest in US government bonds. It will be expected to not lose money, and to make as much money as a typical investor in US Government bonds.

Is this a Fund to temporarily park the money when there is high volatility in the market?

Some people use it to generate a little more interest than they can get in a typical savings account, with zero risk of default. This can be people who want to know it won't go down in value. That could be somebody who will be buying a house soon, or with their kid starting college this year, or somebody who is retired. It can also be a place to park funds that you don't want in the market at this time.

How this Fund will respond to stocks and bonds?

It will not react the way a stock does. It depends on what rates the government is paying for their bills, notes, and bonds. That could be going up or down based on inflation, the economy, and the like.

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EDIT: answered the title question.

What is a Government Money Market Fund?

What it says on the tin: it's a money market fund backed by very short term government bonds.

Is this a Fund to temporarily park the money when there is high volatility in the market?

Yes. BUT... you -- a consumer investor -- don't know when the volatility starts and when it will end.

How this Fund will respond to stocks and bonds?

It won't, since, although it's technically a bond fund, treat it as cash.

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