The assessment of money market mutual fund rates is most accurate when one has a solid understanding of the underlying money market instrument. The money market is a term for the collection of borrowers and lenders who work with very short term loans, up to 90 days. The interest rates are more favorable for both lender and borrower when compared to loans obtainable at big banks.

Investors enter the picture in two ways. The first is that they may put money into a money market account at a conventional bank. The bank pools the customers’ money together to buy into the money market, and takes a small cut. Investors investing their money this way get a well-defined return over time but do not have control over the underlying security.

But another way of buying into the money market is to open a brokerage account and purchase shares in a money market mutual fund. Brokerages pool the money of investors and give them ownership over the shares which can reap returns when sold. The brokerage takes a small in terms of fees but otherwise gives up the dividends to the customer.

It is not so hard to get access to a money market account at a local branch of an interstate bank. Approach and inquire about details on returns and deposit minimums before signing any forms. Accounts are likewise guaranteed in the event of a bank collapse by the FDIC.

Is a money market fund better than other funds? Consider a less appreciated gem in the financial world: the GNMA mutual fund. In the time of the economic disaster perpetrated at least partly by the property meltdown of 2007, Freddie Mac and Fannie Mae exhibited hemmorhaging losses prompting a statement from the Treasury to prevent investor panic. Ginnie Mae discovered that it was in a vastly improved position, displaying almost no sign of being in dire straits. A mutual fund holding 85% or more of assets in GNMA-related securities is considered a Ginnie Mae fund.

What about bond funds? Giant conglomerates and governments are required to carry debt in order to execute normal activities until ample tax is generated to repay the borrowed money. Such a large scale financing cannot be done using a normal bank, but instead should involve the selling of bonds which are guarantees of repayment. People put their money into bonds due to reliable promises of return and lack of default risk.

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