Money market funds (MMF) are simply mutual funds that invest in short-term debt securities.

Debt securities means things like T-Bills (Treasury Bills) and other instruments backed by the U.S. government. No, they're not FDIC insured but because the federal government can raise taxes to meet its obligations, you don't have to worry much about losing your money.

Short-term means securities that mature in a year or less, so the fund is always making money somewhere.

That makes money markets a low-risk investment with a more than decent return. Put several of these investments in a pool, and you've got yourself a money market fund.

Why would you want to invest in a money market fund? Let's count the ways, shall we?

• Liquidity - Money market funds give you great liquidity, meaning you can get to your money relatively quick without paying massive withdrawal penalties as you would with an IRA.
• Low-risk - Because the debt securities are tied to the U.S. Government, your money is pretty secure.

• Decent return - Money market funds offer a considerably better interest rate than traditional savings accounts and CD's.
• Diversity - Like any mutual fund, a money market fund brings a little diversity to your investment portfolio. And with thousands of money market funds to invest in, you just made "diversification" your middle name.

So, what are the drawbacks?

To be honest, I love money market funds but as with any investment, there's always a little risk:

• No guarantee - Money market funds are NOT FDIC insured - meaning if one did go belly-up due to some freak occurrence, your money isn't guaranteed.
• Fees - All mutual funds are managed by a fund manager and with that service, comes the fees. Be sure your fund is a "no-load" fund, meaning there's no sales commission being paid for your investment.