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With My Mind on My Money

Matt Krantz, a financial markets reporter for USA Today gets asked a new question about the stock market every week. This week, readers wanted to know whether or not money market mutual funds are 100% safe.
 
The short and sweet answer is no, they’re not. If it doesn’t say FDIC or NCUA insured it, then you’ll have to contend with the possibility of loss. Investors can be reassured, however, by the fact that money market funds grow at a slow speed that offers very minimal risk. They generally invest in short-term debt by corporate companies; however it’s secured debt that you’re investing in so it’s likely to be repaid.
 
So, while these funds aren’t guaranteed, they are the safest in the stock market. Financial companies go out of their way to keep their net asset value intact, lest they send wary investors running out the doors in fear and into the arms of the competitor. If you’re looking for the safest place to park your money in the stock market, this just might be it.
 
What are your experiences with money market mutual funds? Let us know if this is one of the ways you're investing today—or if you like to take a bit more risk to reap rewards.

Posted: 8/20/08