Money Market Funds and Certificates of Deposit - dummies

Money Market Funds and Certificates of Deposit

By Matt Krantz

If you’re looking for safe investments but want to get more interest than you’re getting in a bank savings account, you might consider money market funds or certificates of deposit:

  • Money market funds are a place to park money you need in case of emergency. They invest in very safe fixed-income securities, such as highly rated investments that come due in 90 days or less. Money markets generally invest in short-term Treasurys and commercial paper.

    Commercial paper obligations are loans generally given to creditworthy companies to fund short-term needs, such as buying goods to be sold in a few months. Money markets, however, aren’t insured by the Federal Deposit Insurance Corporation (FDIC).

    Money markets are relatively safe, but not bulletproof. During the financial crisis that erupted in 2007 and 2008, one money market fund, the Reserve Primary Fund, “broke the buck” and returned just 99 cents of every investor’s dollar. is a useful site to find the best money market fund for you. The site’s CD & Investments tab has a great money market account screener that you can use to pick a money market account that best suits your needs.

  • Certificates of deposit (CDs): If you want an even safer investment than a money market — and are willing to take a lower return — you might want to consider a certificate of deposit. CDs are typically issued by banks, and their interest rates can vary quite a bit. CDs are also usually insured by the FDIC.

    If you buy a CD, your money is locked up, and you’ll usually get hit with a penalty if you need the money earlier than its maturity. If you need access to your money, a money market might be a better choice.

    If you’re looking for the highest CD rates, these sites might help:

    • can help you track down a money market fund, and it can also help you pinpoint the highest-yielding CDs. Just click the CDs & Investments tab to bring up a page with various CD tables, CD calculators, and CD search tools.

    • This site lists national averages for CDs, money markets, and Treasurys.

    • iMoneyNet: And you thought iMoney was the green stuff you set aside to buy a new iPhone. iMoney is in fact a great source of info for all things money funds related. It explains the different types of money funds and provides average rates. You can also use the site to find large and highly regarded money market funds.

You might be able to buy some money market funds through your online broker, but sometimes you need to contact the money market provider directly through its website. With CDs, you need to sign up over the bank’s website.