Money market funds are a type of mutual fund that is required by law to invest only in low risk securities. In a way, money market funds are similar to savings accounts but they are less liquid and with a higher interest rate.

Money market funds
usually invest in secure and low risk investments such as certificates of deposit, government bonds, commercial paper of companies, treasury bills, and other investments that are deemed to be relatively “safe”. MMF’s attempt to keep their net asset value per share (NAVPS) at a constant $1.00 per share and only the yield goes up or down.

Since money market funds generally give higher returns than savings accounts and are also deemed to be safe investments, many investors use MMF’s as a place to park their money between investments. Here are some of the best performing money market funds with the highest rates in 2011:

1. Tennessee Commerce Bank
Rate (APY): 1.50%
Minimum Deposit: $250

2. SmartyPig
Rate (APY): 1.35%
Minimum Deposit: $1

3. EBSB Direct
Rate (APY): 1.30%
Minimum Deposit: $5,000

4. Hudson City Bank
Rate (APY): 1.25%
Minimum Deposit: $2,500

5. DiscoverBank
Rate (APY): 1.15%
Minimum Deposit: $1

6. American Express
Rate (APY): 1.15%
Minimum Deposit: $1

7. EverBank
Rate (APY): 1.13%
Minimum Deposit: $1,500

8. Ally Bank
Rate (APY): 1.00%
Minimum Deposit: $1

For those looking for a safe buy higher yielding investment, Tennessee Commerce Bank gives the best deal at 1.50%. But if you have less than $250 to invest, SmartyPig also gives a good deal with only $1 as the minimum deposit.

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