How to Understand Money Market Funds

Investment and stock market lingo can be confusing sometimes, but it is important to know about the economy. Here is a brief tutorial on what money market funds are!

Difficulty: Moderately Easy

Instructions

1. Know that money market funds are a specific type of mutual fund. These funds only invest their resources in money markets, hence the name! The money market funds utilize short time period investments such as treasury bills or CD's (certificate of deposits).

2. Realize that due to the way in which they use the pool of investor resources, money market funds are one of the most conservative funds on the market. It is not likely that the fund will fail, and you will probably always make money. The risk is very low.

3. Understand that money market funds by their nature are very liquidable and are a safe alternative to just leaving your money in a savings account. However, with that said, you will not see sizable gains from a money market fund because of its conservative nature.