ShmoopTube

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finance a la shmoop. what is a money market fund? isn't it a strange concept

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to think about going to a market to buy money? [man walks through grocery store]

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well yeah it's strange but the practice exists and it's a huge multi trillion

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dollar market today. the key word here is money and not investment. why such a big

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diff? well because the notion of investing implies duration. that is when

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you invest in a nice fixer-upper home or a tractor distribution company or shares

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in a fat dividend-paying bank you're investing for presumably a long time [people stand in line]

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like years maybe decades maybe centuries if you can find the right miracle pill.

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but here we're talking about money like the stuff you can buy candy with. so it's

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short term not long and a money market fund basically comprises many series of

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pretty safe bonds that are all coming due in the next 30 to 90 days. sometimes [pie chart]

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longer than that sometimes shorter but generally in the very near future. so why

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would you care about a money market fund? well because it pays you slightly more

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interest on your money than say a bank checking account. and lots of people in

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corporations need cash just sitting around to pay their bills, so there are

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tons of money market funds out there available and that's the gist of a money

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market fund. we're sure you'll have plenty of experience with them by the

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time you hit your sixth hundredth birthday day [people cheer and hold birthday cake]

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