Glossary
Money Market Fund
A money market fund is a mutual fund that invests in very short-term, high-quality debt — such as Treasury bills — aiming to keep its share price stable at $1 while paying interest that tracks prevailing short-term rates.
It is the standard cash vehicle inside brokerage and retirement accounts. Unlike a bank account, it is an investment, not a deposit: there is no FDIC insurance, though funds holding government securities carry very low risk. Yields move with the Federal Reserve's rate — near zero in some eras, several percent in others.
Why it matters in practice
Money market funds often pay materially more than bank checking or savings accounts, making them a reasonable parking place for emergency funds and cash awaiting investment. The risk is not usually loss but stagnation: cash that was parked "temporarily" and stayed for years, earning less than inflation while the market compounded — uninvested cash quietly accumulating is one of the most common findings in account reviews.
Related terms: Liquidity · Yield · Bond · Inflation · Opportunity Cost