A money market fund is a type of mutual fund that has relatively low risks compared to other mutual funds and most other investments and historically has had lower returns. Money market funds invest in high quality, short-term debt securities and pay dividends that generally reflect short-term interest rates. Many investors use money market funds to store cash or as an alternative to investing in the stock market.
Government and retail money market funds try to keep their net asset value (NAV) at a stable $1.00 per share using special pricing and valuation conventions. Institutional prime money market funds must allow their NAV to float based on the current market value of the securities in their portfolios. Unlike a “money market deposit account” at a bank, money market funds are not federally insured.
Before investing in a money market fund, you should carefully read all of the fund’s available information, including its prospectus (or summary prospectus, if the fund has one), and its most recent shareholder report.
