Money-market funds

A money-market fund invests in very short-term, high-quality debt — things like government treasury bills and top-rated corporate loans. It aims to preserve capital while paying a modest, steady return.

What it's for

• A home for cash that may earn more than a basic current account.
• "Parking" money between investments.
• The low-risk anchor of a portfolio.

Characteristics

• Low risk, but not the same as a guaranteed bank deposit — it's still an investment, and in rare stress events values can dip.
• Highly liquid — usually accessible within a day or so. See liquidity.
• Returns track short-term interest rates, so they rise and fall with central-bank rates.

How it compares

• Vs a savings account: may pay more, but usually lacks government deposit protection.
• Vs bond funds: lower risk and lower return, because the debt it holds matures very soon.

Key takeaway

Money-market funds are a useful middle ground between a savings account and bond funds — sensible for cash you want to keep relatively safe and accessible, while earning a little more than it would sitting idle.