What is a money market fund, and how does it differ from a CD?

A money market fund is a low-risk mutual fund that holds very short-term, high-quality debt like Treasury bills and aims to keep a stable $1 share price while paying interest that tracks current rates. A CD is a bank deposit that locks in a fixed rate for a set term. The big differences are liquidity and guarantees: a money market fund lets you withdraw anytime with no penalty, and its yield floats up and down with rates, but it's a fund (not FDIC-insured, though generally considered very safe). A CD ties up your money for the term and charges a penalty for early withdrawal, but it locks your rate and carries FDIC insurance up to $250,000. Money market funds suit cash you want accessible and rate-responsive; CDs suit money you can commit and want a guaranteed rate on. Many people use both – the fund for flexibility, CDs for a known return.