What is the differnce between money market funds and mutual funds? What risk is involved? Is either zero risk?

Who has the highest rates?

nothing is ever zero risk!

first you must understand what is meant by risk.

if you keep you life savings in a bank safe deposit box, it will be very safe from principal loss, but if inflation is 4% your money will only have half the value after 18 years (then half again in the next 18) so risk has to be looked at in those terms as well

a money market is generally a place to put money so that it is not effected by the ups and downs of the market. However, today you need to be careful, because some of the 'high interest money market funds' are backed by the same investments that are causing so much problems in the financial markets today. Most are probably ok, but check with the institution.

it is also a good place to put emergency money, because it is always available.


a mutual fund is a 'basket of stocks'. you can get a mutual fund for all different parts of the market.

some contain a combination of stocks and bonds and change the percentages of each automatically as you get older. some are very specific.

indexed funds - that have stocks like the dow or s&p, large companies or small companies etc

bond funds - contain bonds
sector funds - contain medical companies, or technology companies etc
aggressive growth funds

there are all kinds. but check their 'expense ratios' lower is better

there is a higer risk of principal loss with mutual funds, especially now!!!!!! but because funds tend to grow at a much higher rate then money markets (over a long period of time) they don't have the inflation risk

A money market fund is actually a particular type of mutual fund that invests in very short-term, high quality bank notes and bonds. Some restrict themselves to only government bonds. No fund is "zero risk" but money market funds are much lower risk than equity or general fixed-income mutual funds.

Money market funds are mutual funds that purchase short term money market debt instruments.
In other words, money market funds are technically mutual funds that purchase bonds that have a very short maturity, usually 1-3 months. They typically have yields similar much higher than regular bank accounts.
Mutual funds are just mutual funds, and is a very broad term that includes bond funds and money market funds to stock funds.

The risk involves depends on what the fund buys. And funds do not have "rates." They are called yields and the yields on money market funds change everyday.

And nothing has zero risk.