Money Market Funds
A money market fund is a type of mutual fund that is required by law to invest in low-risk securities. These funds have relatively low risks compared to other mutual funds and pay dividends that generally reflect short-term interest rates.
Money market funds typically invest in government securities, certificates of deposit, commercial paper of companies, or other highly liquid and low-risk securities. They attempt to keep their net asset value (NAV) (the value of a share) at a constant $1.00 per share - only the yield goes up and down. A money market's NAV may fall below $1.00 if the investments perform poorly. While investor losses in money markets have been rare, they are possible.
An investor tendering mutual fund shares, including shares of money market funds, for redemption generally must be paid within seven days of tender.
Unlike a "money market deposit account" at a bank, money market funds have traditionally not been federally insured.
Before investing in a money market fund, it is advisable to carefully read all of the fund's available information, including its prospectus, or profile if the fund has one, and its most recent shareholder report.