PSST ... Would you like to buy some money ... cheap?
A money market fund invests in short-term investments that pay interest.
Money market funds may invest in ...
U.S. Treasury bills and notes
Certificates of deposit
Money market funds don't invest in ...
Because these investments are very short-term and pay a fixed rate of interest, there is little risk that their prices will change a lot - so they provide a low-risk alternative for investors.
But with little risk - there's also little return. If you invested only in money market funds, your money wouldn't grow that quickly and might not even keep up with inflation - that's the tradeoff for having a low-risk investment. On the other hand, money market funds can provide a safety net for part of your nest egg, because money market investments don't lose value the way stocks and bonds can. This may be especially important during your retirement years.