Money market funds are a very specific kind of mutual fund. Instead of working with a very high number of different stocks or bonds, money market funds. These funds are generally fixed so that they have a very low chance of risk – it’s very unlikely for any individual investor to lose money that has been invested in one of these funds. The risks involved with money market funds have nothing to do with how likely it is that you’ll lose money, and everything to do with the fact that should you lose any money in the fund there is no chance for you to get that money back. This is due to the fact that money market funds are not insured by the federal government.
However, these funds are much easier to deal with than other types of mutual funds, in fact, since it is unlikely that you will need to change your investment very often. Many people use this as a safe investment, that is similar to a bank account. You will not lose your money (with all likelihood) but you will also not end up with a high return on your investment.
Money market funds are so similar to bank accounts that in a lot of cases they actually provide a decent alternative to your bank account. In fact, a lot of money market funds will even let you write checks that withdraw money from your contribution to the fund. Essentially, this is so similar to a bank that if you do not want to keep your money in a bank account, you should think about putting your money into a money market fund instead.
Overall, however, unless you have a serious problem with keeping your money in a bank account, it is not recommended that you put all of your money into a money market fund due to the lack of insurance should the fund lose a lot of money.
Money market funds are best for people who are looking for a way to save their money without using a bank, or for people who want to invest their money with very little risk.