Money Market Fund Yields Top 5% But Lack FDIC Backing
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Money market funds are mutual funds invested in short-term, safe securities that closely track the Federal Reserve's rate. Yields now top 5% due to rising interest rates.
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Money market funds aren't insured by the FDIC but aim to maintain a net asset value of $1 per share to avoid losing money.
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These funds are best for money you may need to access quickly, like an emergency fund, not long-term growth.
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Pros principal protection, liquidity, possible tax advantages (with municipal money market funds)
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Cons yields may not outpace inflation, no federal insurance protections