Money market funds are a type of mutual fund that invests in low-risk, short-term debt securities, including Treasury bills, municipal debt, and corporate bonds. They are designed to be a safe and liquid investment option, suitable for money needed in the short term, like an emergency fund. Money market funds are regulated in the United States by the Securities and Exchange Commission (SEC) under the Investment Company Act of 1940.
These funds aim to maintain a stable asset value, often targeting a net asset value (NAV) of $1.00 per share. However, it's important to note that while they seek to preserve capital, money market funds are not guaranteed or FDIC-insured, so there is a small risk of loss. Money market funds come in different types, such as government, prime, and municipal, each with varying investment focuses and risk/return profiles. The yields (income) generated by money market funds can be taxable or tax-exempt, depending on the underlying investments. The annual expense ratios for money market funds can range from 0.07%–0.12%, or $7–$12 for every $10,000 invested. As of February 2025, total money market fund assets were $6.9 trillion.
