Investing money is a decision that can't be taken lightly, even when that decision is investing in relatively safe money market funds. While these funds carry less of a risk than investing in traditional stocks, they still pose a risk.

Before grabbing the money market listings, you should understand all of the basics about money markets. Consider the following suggestions to get you well versed in money market funds for beginners:

1. Know the meaning of the term money market funds prior to investing any money.

2. Compare money market funds and money market accounts to decide which is right for you.

3. Learn the inner workings of money market funds.

Action Steps
The best contacts and resources to help you get it done

Understand the definition of money market funds

Just as with any investment, understanding exactly what it entails is vital to making the best decision for your needs. According to the SEC, money market mutual funds are 'a type of mutual fund that is required by law to invest in low-risk securities.' This means that the SEC considers these funds to be a good investment for people who want to be conservative with their money.

I recommend: You can find a easy to understand description of money market funds on the U.S. Securities and Exchange Commission website. InvestorWords.com offers an in depth definition of money market funds, including the types of funds that can be listed as money market funds. WiseGeek has a thorough, yet easy to understand article that describes money markets.

Know what differentiates money market funds and accounts

A money market fund account is an investment account. A money market account is nothing more than a high interest savings account that can be opened at a bank. Money market fund rates fluctuate with the market, while money market account rates generally don't fluctuate much. Another marked difference between the two is that money market accounts are usually covered by the FDIC, while money market funds aren't.

I recommend: BankRate.com offers a basic explanation of what a money market is, including ways to differentiate a money market fund from an account. Learning Markets has information about distinguishing factors that separate money market accounts and money market funds.

Understand how money market funds work

When you invest in a money market fund, you are handing your money over to an investor who will invest in certain companies. Some money market funds include a money market directory, which lists the funds invested in. Others contain only a money market funds ranking, which stipulate what rankings a company must have in order for the investor to invest in it. Once the money is invested, it is considered short-term securities funds, meaning that it will be cashed out at a certain date, which is often six to twelve months from the investment date.

I recommend: The Investor FAQ offers a detailed look into the life of a money market fund. Mahalo offers an article that includes how these funds work, as well as the benefits and drawbacks of investing in them. Young Money offers information on the way a money market fund works. It includes suggestions on investing in money market funds.

Money market funds are low risk mutual funds that pay returns on shares reflecting short term interest rates. Money market funds invest in government securities and are a great way to diversify your portfolio. These types of funds are also good for new investors still unsure of the business of investing.

The mandatory management of your assets in a money market fund can be both a positive and a negative trait, however. While mandatory management provides professional management for funds, it also leaves the investor without control. This can be a frustrating aspect of money market investment. Before choosing a government money market fund, consider the following:

1. How much of your savings are you are willing to invest into a prime money market fund?

2. Research a money market directory for assistance in choosing the right institution to invest with.

3. Ask about the a money market fund's recent ranking ask prior to making your decision.

Action Steps
The best contacts and resources to help you get it done

Start your portfolio with money market mutual funds

If you are a first time investor, a money market mutual fund is a safe bet. Money market funds also offer good returns. In addition, small contributions by cautious investors are always welcome. Once you get your feet wet, you may consider increasing your contributions.

I recommend: Investment Company Institute has an extensive FAQ page for new investors. They also offer a money market directory to review.

Consider tax-free money market funds

There are some types of federally tax-exempt money market mutual funds that invest in short term debt obligations. These offer a lower yield; however, their tax-exempt status compensates. These are worth investing in, but be cautious and confirm your tax obligation before making on decision on which money market fund to go with.

I recommend: Investopedia offers more information on the pros and cons of tax-free mutual funds. If you're looking for a good fund to invest in, Fidelity's tax-free money market mutual fund (FIMXX) is a good place to start.

Review fees before choosing among top money market funds

Though money market fund rates should be an important part of your decision, remember that different mutual funds have various fees associated with them. Always check to see if initial sales fees, management fees or transaction fees are involved. It's not unusual to compare fees between money market mutual funds to better understand what is expected and what is above and beyond the norm.

I recommend: The U.S. Securities and Exchange Committee offers a list of fees to watch out for in their introduction to mutual funds. Bankrate.com tracks money market fees and rates.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Before choosing a money market fund account, always review all information associated to that particular fund, including: the money market fund rates, that money market funds ranking, its prospectus and the most recent shareholder report.

Money market mutual funds are some of the lower-risk investing options available, and so are ideal for people new to investing. However, because they do still carry some risk, it's important to compare money market fund rates, find money market funds ranking guides, and search for advice on investing in these funds. You can search a money market directory, or turn to general investing guides for their take on money market investing.

You'll need to educate yourself both on money market funds, and on general investment strategies. Sources of money market funds advice and ratings include:

1. A money market directory that lists fees and rates.
2. Money market fund directories that break down funds into easy-to-search categories.
3. E-mail alerts and newsletters.

Action Steps
The best contacts and resources to help you get it done

Find top money market funds by comparing fees and rates

You'll want to find money market accounts with the lowest fees but best rates, and many sites simplify this for you, by monitoring money market funds across the country. At these sites, you can find out the rates in your area, or search for the best value in money market accounts across the country.

I recommend: At Bankrate.com, you can search money market listings by state to find rates in your area, or search for the best rates nationwide. The site also features money market news and advice. Bankaholic.com tracks the highest rate money market accounts nationwide.

Find money market listings that offer several ways to search for and evaluate funds

Look for websites that break down money market funds into several categories, so you can more quickly compare and evaluate several types of funds, or locate ratings only for the kind of fund you're interested in.

I recommend: Morningstar offers comprehensive research and ratings for money market and mutual funds, including its "quickrank" search tool, or you can narrow your search by category, such as large-cap, small-cap, core international, emerging markets or high-yield. The site also offers analyst research, including daily losers and gainers, and a listing of everything from three-month to 10-year top performers. Or, check out the MarketWatch research and tools section, which includes categories like top funds, 25 largest funds, fund overview, fund performance, and fund rankings and risk.

Receive up-to-the minute money market fund account advice with alerts and newsletters

Find websites that offer not only thorough money market guides, ratings and advice, but also newsletters that provide the latest in the money market field.

I recommend: The Street offers several subscription services, including weekly roundups, blogs and forums that offer advice and discussion, and e-mail alerts of recommended investment moves. One of the site's subscription services offers access to a sample portfolio, as well as weekly summaries rating each fund and stock in the portfolio. Standard & Poor's offers a comprehensive money market funds section, as well as several newsletters.