When we talk about these so-called safer arenas, the subject of money markets almost inevitably comes up. Money market funds are conservative investments that offer liquidity, current income, and stability of principal. Money market mutual funds generally invest in short-term debt securities, such as banker's acceptances, commercial paper, negotiable certificates of deposit, and Treasury Bills with a maturity of one year or less, and often 30 days or less.
Interest earned is computed daily and credited to customers' accounts monthly.
This interest comes in the form of monthly dividends that vary based on market conditions. This interest can be automatically reinvested. Although it's rare, a money market can perform poorly. Even when a money market does well, though, and keeps up with inflation, it will not provide you with the level of return you may want to finance your goals. In fact, you'll usually earn a little more than the current interest rate offered by banks-maybe enough to keep just ahead of inflation.