What is a defining feature of a money market investment?

A defining feature of a money market investment is that it is insured by the FDIC (Federal Deposit Insurance Corporation) or the NCUA (National Credit Union Administration). This insurance protection provides a level of safety and security for investors because it guarantees that their principal investment is protected up to certain limits, typically $250,000 per depositor, per insured bank or credit union. This makes money market accounts an attractive option for conservative investors looking for safety while still earning a return.

Although there are other characteristics associated with money market investments, such as typically offering competitive but lower interest rates compared to stocks or bonds, and often having restrictions on the number of withdrawals, the insurance aspect is a key defining feature. This distinguishes them from other investment types that may not have similar protections and often carry more risk.