The name of the game is money. Hel-l-o-o-o-o!

We got into a discussion the other day (over at the Helium website) about the differences between money market funds and CDs. While we're at it, the discussion contained the key phrase money market funds - not money markets, a wide-spread misnomer.

Meanwhile, money market funds are actually mutual funds that are managed, and they invest in commercial paper and other short-term cash equivalents, typlically called "obligations". The only change that takes place in a money fund [of importance to investors] is its dividend yield, generally expressed in annualized terms but calculated over periods of 7 and 10 days (mutual funds, including money funds, don't pay interest). The yield will fluctuate, but not the principal.

The share price has always been one dollar. The shorter the term of certificate, which is most often between 90 and 180 days, the safer it is. That characteristic alone helps to make the decision a lot simpler when the choice might be based on the annualized yield.

To go a step further, the most compelling reason to "invest" in a money market fund is to have liquidity - which is to say, write checks, make frequent withdrawals and invest in other vehicles - and getting a better dividend rate (not interest rate) than a short-term CD.

Certificates of Deposit pay more interest when the date to maturity is further away. Their main attraction to knowledgeable customers is that they are guaranteed by way of insurance. Money market funds can never be insured.

Obviously, there is a wide-spread misconception about the nature of money market funds for a large population of investors. (I thought this platform was too good an opportunity to pass up.)

Over the years, including our recent interaction with Helium, we have identified a class of people that believes money market funds invest in the stock market. This is a gross misconception. For the sake of making the connection, go no further than the name of the fund(s). M-o-n-e-y. Money. For further clarification, please take a quick glance at the SEC's definition of the security.

In addition, they are not considered viable investments for long periods of time. Sure, they're as safe as can be. So is a Hummer! Why don't we all go out and buy one! There are thousands of people who put half their savings into these investments. It's wrong, with a capital 'R'. It's like driving from L.A. to San Diego with your foot on the break pedal. Don't do it.!

Whew! That felt good.

Hudster