Investors value money market funds for two main reasons. First, they are stable. Second, money market funds generally allow free checkwriting—providing instant liquidity.
The SEC requires most money market funds to invest at least 95% of assets in "first tier" securities—U.S. Treasury issues and privately issued securities carrying the highest credit rating by at least two of the five major rating agencies. Because money markets invest in very short-term, high-quality securities, they are the lowest-risk investment among all mutual funds.
Unlike bank deposits, the principal and payment of interest in money market funds are subject to some risk. Nonetheless, money market funds have an excellent track record overall, and they are popular investment vehicles for cash reserves among large and small investors.
All money market funds are considered to be liquid because the maturities of the securities in them are short enough to classify the securities as "cash equivalents."
Note that an investment in a money market fund is not insured or guaranteed by the FDIC or any other government agency. Although a money market fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in a money market fund.