Money market funds are a type of investing that pools resources from a large group of investors. Money market funds were first regulated in the United States in the 1940s and are often seen as risk-free investment platform that is similar to a traditional savings account. Money market funds work to reduce risk by limiting market exposure and optimizing liquidity. For this reason, money market funds usually invest in debts with low risk that mature in less than 13 months. In fact, money market funds must follow strict orders, and they usually have to invest no more than five percent of their value in a single entity. Money market funds usually purchase commercial paper, bonds and other types of funds. Often, money markets invest their funds in a variety of different instruments. The funds were originally developed in the United States to help investors bypass a law that prohibited some types of deposit accounts from paying interest.
