When you compare the benefit of putting your cash in a money market fund with that of a bank account, you should keep a number of things in mind.
* Interest rates: Most people assume they can earn more in a money market fund than in a bank account, but the rate offered by a money market fund will always be higher in a declining interest rate environment. On the other hand, in a rising interest rate environment, a bank account is likely to offer you a better interest rate;
* Management abilities: A money market fund manager's ability to read the market correctly so that the fund goes into cash when interest rates start rising is very important;
* Time constraints: A money market fund holds assets and a fund manager may not be able to switch to cash quickly enough, so in some instances a bank account can still be a better option;
* Trade-offs: You should consider the trade-off between a better rate in, for example, a bank's 32-day notice account, which ties up your money for 32 days, and the immediate access to your cash in a money market fund; and
* Fees: Finally, you should consider the fees charged by a fund as these may determine whether investing in a fund is worthwhile.