Definition of Money Market Fund (MMF)

mutual fund that invests in short-term debt instruments, such as acceptances, Treasury bills, commercial paper, and negotiable certificates of deposit. Most funds invest in high-quality paper, although some funds have purchased noninvestment grade securities to offer a better yield. Money market funds, managed by investment companies registered with the Securities and Exchange Commission, typically buy paper with maturities of 60 days or less. A fund sells shares to investors, who receive regular interest payments. The amount of interest earned by an investor depends on several factors, including the general level of interest rates, the management fee or commissions charged by the fund's manager, and whether there are redemption fees present. The fee structure in a money market mutual fund and investment characteristics of the portfolio are spelled out in the fund prospectus.