Money Market Funds vs. Money Market Deposit Accounts

I received a number of viewer e-mails with questions about money market funds. I want to clarify the difference between a money market fund and a money market deposit account.

A money market fund is one type of mutual fund that is invested in low-risk securities — such as U.S. Treasury bonds. Money invested in a money market mutual fund is not insured.

Separately, a money market deposit account is an investment in an interest-bearing bank account that is federally insured if the bank is an FDIC institution. Therefore, an individual may be insured up to $100,000 for a standard account or $250,000 if the money is specifically in a retirement account.

Mellody HobsonPlay

The bottom line on both — they are extremely safe investment vehicles, and the benefits of a money market fund far outweigh any of the risks.