Money Market Funds are simply co-mingled funds that invest in short term securities of a low risk nature. Since these funds invest primarily in securities issued by the U.S. government, banking institutions and prime rate corporations, they are considered quite safe for the average investor.

The return, or yield, on money market funds has averaged between one to two points under the current prime rate. The return when compared to other investment vehicles may be equal to, above or below, depending on prevailing interest rates.

Like all managed funds, money is gathered from many different investors, and the resulting pool of cash is used to acquire particular securities. Each fund buys various government and bank notes and the details of these investments are contained in the fund’s prospectus that each purchaser must receive and read prior to making an investment.

People with years of experience in this field typically manage these funds. Their experience and the fund’s past performance are also spelled out in the prospectus. However, historical performance does not guarantee future performance.

Some of these money market funds require an initial investment as low as $500, others require $5,000. After making the first investment, you may usually then make additional contributions of a lesser amount.

Another attractive feature of money market funds is that they are liquid. You may withdraw money when needed quite quickly. Some funds even provide investors with a check writing privilege that allows them to write checks on the investment. When the draft is presented for payment, an appropriate amount of the fund is liquidated. The investor’s money has earned interest during this period of float.

No other investment gives the individual investor this combination of safety, market sensitive earnings and liquidity.