Money Market Fund
A low-risk mutual fund investing in short-term, high-quality debt instruments to preserve capital and provide liquidity.
What is Money Market Fund?
A money market fund is a type of mutual fund that invests exclusively in short-term, high-quality debt instruments — Treasury bills, commercial paper, certificates of deposit, and repurchase agreements — with maturities typically under 13 months. The primary goal is capital preservation and liquidity rather than growth. Most money market funds maintain a stable net asset value (NAV) of $1.00 per share. They are distinct from FDIC-insured bank money market accounts: money market funds are SEC-regulated investment products, not deposits, and carry (though historically very low) investment risk. During the 2008 financial crisis, the Reserve Primary Fund 'broke the buck' — its NAV fell below $1.00 — triggering industry-wide regulatory reform.
Example
In 2023–2024, as the Federal Reserve raised interest rates to combat inflation, money market fund yields rose to 5% or higher — attracting hundreds of billions of dollars from low-yielding bank savings accounts. The Fidelity Government Money Market Fund (SPAXX) held over $200 billion in assets at its peak, offering institutional-quality yields to retail investors with same-day liquidity.
Source: SEC — Money Market Funds