Investing term
What is Money market fund?
A fund that holds very short-term, high-quality debt (like T-bills) and aims to stay stable at a $1 share price.
A money market fund holds very short-term, high-quality debt — like Treasury bills and top-rated commercial paper — and aims to keep a stable share price (often $1) while paying interest. It's a fund, not a bank account, but it's designed to be about as steady as cash while earning a real yield.
It's a low-risk place to park cash that earns more than an idle brokerage balance, commonly used for an emergency fund or money waiting to be invested. The trade-off is that it's an investment, not a formally guaranteed bank deposit — its stability rests on the quality of its short-term holdings rather than on a deposit-protection scheme, though such funds are conservatively run and rarely disappoint.
A money market fund holds short-term, high-quality debt and aims to keep a steady $1 share price while paying interest — a low-risk home for cash, though not a guaranteed bank deposit.
For example
You hold cash in a money market fund earning 4.5% between investments, instead of letting it sit at near-zero in your brokerage's default account.
Learn it by doing
That's Money market fund in theory — it clicks when you use it. Practise it hands-on in a free, interactive lesson (Stage 4, Stocks, Bonds, Cash & Alternatives).
Try the free lesson →Why it matters to you
Money market funds matter because they're the workhorse home for 'in-between' cash — money that must stay safe and liquid but shouldn't sit earning nothing. For an investor holding a cash buffer or waiting to deploy funds, the difference between a money market yield and a near-zero default balance compounds into real money over time. They turn idle cash into a small, steady earner without taking on market risk.
⚠ Assuming it's identical to a bank deposit
A money market fund is very safe, but it's an investment fund, not an insured bank deposit — its stability depends on the quality of its holdings rather than a government guarantee. In extreme stress, a fund can in rare cases 'break the buck' and dip below its stable price. It's a great cash home, but know it isn't the same as protected savings.