A money market mutual fund is a short-term mutual fund that invests in government securities, certificates of deposit, asset-backed commercial paper and other highly liquid securities.  Money market funds sell shares to investors and earn interest based on performance.  However, if the fund suffers a major loss, the shareholder has no guarantee that the investment will be repaid.  Until last week, these investments carried no insurance.  However, the new guaranty program applies only to those money market funds that pay a fee to join it, and would only protect assets invested prior to 
September 20, 2008 for a period of one year. 

A money market deposit account is an interest-bearing savings account that typically earns more than a regular savings account, but less than a money market fund.  MMDAs are also less risky than MMFs: they are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $100,000 per depositor per insured bank and up to $250,000 for some retirement accounts. 
Update: On October 3, 2008, FDIC deposit insurance temporarily increased from $100,000 to $250,000 per depositor through 
December 31, 2009.

For more information or to ask questions regarding banking or the financial industry, contact Brad Davis, Hampton State Bank President and CEO, at 641-456-2559 or email him at bdavis@hamptonstate.com.   

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