Money Market Funds

Money market funds are generally the safest and most secure of mutual fund investments. A money market fund is a mutual fund that invests solely in money market instruments. The goal of a money-market fund is to preserve principal while yielding a modest return. Money market instruments are forms of debt that mature in less than one year and are very liquid. These funds are a great place to park your money. Whether you’re storing money for emergencies, saving for the short-term, or looking for a place to store cash from the sale of an investment, money market funds are a safe place to invest. These funds invest in short-term debt instruments and typically produce interest rates that double what a bank can offer in a checking account or savings account and rival the returns of a CD (Certificate of Deposit). Unlike bank accounts and money market accounts, most deposits are not FDIC insured, but the risk is extremely low (only those funds administered by banks are FDIC-insured, but some others are privately insured). Although money market mutual funds are among the safest types of mutual funds, it still is possible for money market funds to fail, but it is unlikely. In fact, the biggest risk involved in investing in money market funds is the risk that inflation will outpace the funds’ returns.