Money market fund.

In plain English

A money market fund (MMF) is a mutual fund that invests in short-term, high-quality debt: Treasury bills, commercial paper, repurchase agreements, and similar instruments typically maturing in under a year. Most MMFs aim to maintain a stable $1.00 share price (called 'breaking the buck' if they fail). Held at brokerage accounts, not banks, and not FDIC-insured. The largest MMFs hold hundreds of billions in assets and are widely used as a parking spot for cash awaiting investment.

01Why it matters

MMFs typically pay yields close to the federal funds rate, so in a 5% rate environment they pay around 5%. That makes them often more attractive than savings accounts, but they lack FDIC insurance and have rarely (twice in U.S. history) broken the buck and lost principal. For very large balances, the SIPC-insured-up-to-$500,000 brokerage protection plus the MMF's own safety profile is the relevant safety net.

02The math, step by step

Vanguard's Federal Money Market Fund (VMFXX) held about $300 billion in late 2024 and paid a 7-day yield of around 5%. Customers parked cash there between investment decisions, earning what a top HYSA paid but inside a brokerage account.

03What this is NOT