A money market fund is open-ended and invests only in short-term debt securities such as CDs (certificates of deposit), Treasury bills, commercial paper, banker's acceptances, and repurchase agreements. A money market fund is usually not FDIC insured but can can be privately insured and are generally considered very safe investments. A money market fund is also very liquid and easily accessible. And because they are so liquid, a money market fund provide a safe place to 'park' money that is not already invested.
Returns on a money market fund are usually modest compared to other types of investments. The smaller returns are due to the low risk involved with a money market fund.
By combining money from large numbers of investors, a money market fund can provide investors with more diverse portfolio. |
