Though not risk free, money market funds have a record of relative safety. Also, no one individual security may make up more than 5 percent of a fund s total assets. Another key attraction of the money market to both large and small investors is the low risk of capital loss due to interest rate fluctuations. Since a money-market instrument can be redeemed at full face value in days, weeks, or months, the usual market risk caused by these fluctuations is minimized. Keep in mind, an investment in a money market fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Investors can lose money.
Knowing which one is best for meeting their investment goals can help investors choose from the hundreds of funds available. These funds invest in corporate, bank, and government obligations. These are the money market funds most frequently advertized. These funds limit their investments to U.S. government or federal agency securities. Because some or all of the securities may be backed by the full faith and credit of the government, they are less risky, and usually have lower yields than general funds.