Money market funds are a type of mutual fund that invests in low-risk, short-term debt securities, such as commercial paper, certificates of deposit, and Treasury bills. These funds aim to provide investors with a relatively safe and liquid investment option that generates a modest level of income.
Money market funds typically maintain a stable net asset value (NAV) of $1 per share, which means that the fund’s value is not expected to fluctuate significantly. Money market funds are often used as a cash management tool by individuals and institutions to temporarily park cash and earn a small return while maintaining easy access to their funds.