Money market funds (MMFs) are a type of mutual fund that invests in highly liquid, low-risk, short-term debt securities and cash equivalents. These investments typically include U.S. Treasury bills, commercial paper, municipal debt, corporate bonds, and other high-credit-quality instruments with short maturities, often under 13 months
. The main purpose of money market funds is to provide investors with a safe, stable, and liquid place to park money temporarily. They offer portfolio diversification, operational ease, and quick access to cash while aiming to preserve capital and provide modest income through dividends. MMFs are considered very low risk compared to other investment types, though they are not insured like bank deposits
. Money market funds differ from money market accounts, which are bank deposit accounts insured by the FDIC. MMFs are investment products requiring a brokerage account and are regulated under securities laws, such as the Investment Company Act of 1940 in the U.S., which limits the quality, maturity, and diversification of their holdings to maintain stability and liquidity
. Investors often use money market funds for short-term savings goals, emergency funds, or as settlement funds in brokerage accounts because they combine relatively competitive yields with easy access and low risk
. In summary, money market funds are mutual funds investing in short-term, high-quality debt instruments designed to offer liquidity, safety, and modest income, making them a cash management investment solution
