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Money market fund

A money market fund is a type of mutual fund that invests in short-term, low-risk debt. Its holdings can include Treasury bills, commercial paper, certificates of deposit, and other instruments that mature quickly. Investors buy shares in the fund and earn income from the interest those holdings pay.

Most money market funds try to keep a stable share price, often one dollar per share. The fund managers do this by holding assets that are short in duration and high in credit quality. Income is passed through to shareholders and can rise or fall as market interest rates change.

A money market fund is not a bank deposit and is not FDIC insured. This makes it different from a money market account, which a bank offers and which deposit insurance covers. Because a money market fund is an investment, its share price can fall below the target and shareholders can lose money.

Related terms: Money market account · Treasury bill · Savings account

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