Money market funds are mutual funds that investors typically use for relatively low-risk holdings in a portfolio. These funds typically invest in short-term debt instruments, and they pay out earnings in the form of a dividend. A money market fund is not the same as a money market account at a bank or credit union.
There’s a big difference between money market funds and money market accounts. Funds are mutual funds that invest in securities, and they can potentially lose value. Money market accounts are often FDIC insured bank accounts.
Money market funds often pay a monthly dividend, but some alternatives exist.
Money market funds are a popular and useful cash management tool in the right circumstances. Before you use money market funds, make sure you understand how they work and the risks you might be taking.
Money Market Fund Investments
Money market funds invest in short-term securities.