what are money market funds

A money market fund is an open-ended mutual fund that invests in short-term debt securities such as US Treasury bills and commercial paper. It is designed to maintain a highly stable asset value through liquid investments while paying income to investors in the form of dividends. Money market funds seek to limit exposure to losses due to credit, market, and liquidity risks. They are regulated by the Securities and Exchange Commission (SEC) in the United States and are important providers of liquidity to financial intermediaries. These funds are characterized as low-risk, low-return investments and are often used by investors who have a low tolerance for volatility or need extremely liquid investments. They are different from money market accounts, which are offered by financial institutions and are insured by the Federal Deposit Insurance Corporation (FDIC)