Mutual Funds: Money Markets

Some things will never be considered sexy, even though they serve a perfectly useful role in our society: Neck braces, car batteries, C-Span. You can add money market funds to that list. (A note to thrill seekers: There will be no promises of huge market gains that create newly minted millionaires, so try to stay awake as you read on.)

Money market funds are a variation on a savings account. The good news is that these funds are virtually risk-free -- you'll only gain low to mid-single-digit returns, but you won't lose money. Plus, they typically allow you to write checks drawing from the money in your account for no charge. The bad news is you don't get to brag about your money market fund's returns to your friends who own a biotechnology fund that just doubled during the past six months (although, if your friend's biotech fund plunges 50%, you may have bragging rights.)

Money market funds invest your money in secure, short-term corporate and government debt such as 13-week Treasury bills and certificates of deposit, or CDs. What do you get in returns? Well, you get your money back for starters, plus whatever interest is earned from the fund's relatively short-term investments. ...