A money market fund invests in short term debt. The goal is to preserve capital, but they do pay interest. They do not all have the same degree of safety. The most secure ones, such as the Vanguard Treasury Money Market Fund (VMPXX), limit their investments to treasuries. This fund is currently paying only 1.48%. Money market funds are not guaranteed by the FDIC. However, the government recently enacted a temporary guaranty program for participating funds.
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