Why mutual fund if money market account has higher interest?

Why would I want to invest in a mutual fund or CD if there are several money market savings accounts with interests over 5%?
For example, one bank offers 5.12% interest (with $3k initial balance) and the other one offers a 5.25% interest.
So why would I go for a CD or a mutual fund or any one of those options?

Thanks.

I do not like CD's they are too restrictive, so I agree with your thoughts here. However, mutual funds offer you much more flexibility. You can invest in a no load mutual fund and start by putting your money in a their money market fund, which will return over 5% (i.e. Vanguard). In addition you also have the flexibility of transferring some of this money into no load mutual funds with growth potential to earn much higher returns. This transfer can be done via phone or via the internet.

Great question and good luck.

Any decent Mutual Fund will make at least 10% for you every year.

Some truth to Castle's answer, but it will come down to risk. Most low risk MF's won't make 10%, but a Money Market at the bank or CD have extremely low risk. You need to ask yourself what your comfort level is if you were to lose some of the money.

Stocks and bonds don't always outperform money market accounts. There are brief times where money market accounts give a higher returns. However, over long periods of time, stocks and bonds usually beat money market securities.

Be sure you are not just comparing yields. The yield on stock mutual funds will only include the dividends. Yield does not include any appreciation in price. You will need to compare total returns, which can only be done accurately in hindsight.

Because MF have the potential to grow much faster and over long periods in the past they did it.

However, past performance is no guide to the future. It is best to have a mixture of the two.