A money market fund is a government regulated mutual fund that invests in low risk securities in order to stave off some risk. In order to maintain a low risk, companies that administer money market funds attempt to avoid risk by investing in products that are generally considered to have virtually no risk, such as Certificates of Deposit, Commercial Paper for companies, and a variety of other highly liquid, low risk accounts.
Generally the way to determine how a money market fund is doing is to look at it’s Net Asset Value. This value is generally kept at around $1.00 for money market funds. This means that if the value is less than $1.00, then the fund is under-performing and if it is above that, then it is advancing.
If you are going to invest in a money market fund, make sure that you do your research. Some funds are much better than others and it is a good idea to know what you are getting into before you invest with them. It is important to read the fund’s prospectus in order to truly understand more about the fund itself. You should also consider doing independent research on the variety of different funds, while at the same time looking at the shareholder report. By looking at all of these, you should have a good idea about what you are getting yourself into and whether or not it will yield positive results.
For the most part you’ll find that with a money market fund you aren’t going to make a lot of money, but generally you can get a better return than you would off of a standard CD or bank account. There is a risk that you could lose money, but with relatively low risk investments, the odds of losing anything substantial is pretty rare.