Money Market Fund vs Money Market Account

Many investors choose to invest in either a money market fund or a money market account. While these are both popular investments, many investors do not know the difference between the two. Here are a few things to consider about money market funds and money market accounts.

Money Market Fund

The money market fund is a mutual fund that holds money market securities. These are securities that have a maximum of 13 months until maturity. According to the SEC (Securities and Exchange Commission), the average maturity of these investments in the fund has to be 90 days or fewer. A money market fund is offered by a company that sells mutual funds. It is often one of the options that you have within a family of funds.

Money Market Account

A money market account is a type of savings account issued by financial institutions. You can open a money market account with any bank that you choose. With this type of investment, you will be able to earn a certain amount of return based upon the total funds that you have in the account.


One key difference between these two types of accounts is the safety of your funds. With a money market account, you are putting your money with a bank that is FDIC-insured. This means that if the bank were to go under, the federal government would give you back the amount that you had in your account up to $100,000. With a money market fund, this is not an option. You are investing your money into a mutual fund, and there are no guarantees of future performance or safety.


In most cases, you will be able to earn a larger return with a money market fund than if you were to invest your money into a money market account. Most of the time you can expect .5 to 1 percent more on an annual basis.

Small Accounts

Both these types of investments are available for those that have small amounts to invest. With a money market account, you will typically have to have a minimum amount of money in your account at all times. With a money market fund, you will typically have to invest at least $500 to $1000 to get involved.

Although they are both available for small account holders, a money market mutual fund might not make sense if you do not have much money to invest. Mutual funds will charge you an annual expense ratio in return for professional money management. This fee will often cannibalize any returns that you are able to generate from the fund. This makes the money market account a little better if you do not have much money to invest.


Both types of investments will have some type of a provision that allows you to withdraw your money easily. For example, you may be given a checkbook that allows you to gain access to your money. With money market accounts, you will have a maximum number of transactions you can make per month. With money market mutual funds, you will typically have a minimum amount that can be disbursed with a check.

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