FDIC Limit

• The Federal Deposit Insurance Corp. (FDIC) insures money deposited into a money market account up to $250,000. So if an investor were to deposit more than that into an account, and the bank failed, the investor would lose any money over $250,000 that he or she put into the account.

Inflation

• Because the average return on a money market account is 2 percent to 3 percent, the risk exists that inflation will outrun that. In that scenario, the investment wouldn't keep pace with the rising cost of living.

Opportunity Risk

• The average return when investing in the stock market is a lot higher than the return on money market investments, so when people invest in the money market rather than in stocks, they miss out on the chance to make more money, called opportunity risk. Over time, the average rate of return from the stock market is 8 percent to 10 percent, which is more than triple average money market returns.

High Fees

• Sometimes, the annual fees attached to money market accounts can eat into profits considerably. For instance, if an investor places $8,000 into a money market account, at 3 percent, the yield would be $240. With an annual fee of $30, that means the actual yield is only $210.

Mutual Funds

• Money market mutual funds pose another hazard. In this case, the investment is most likely not insured by the FDIC at all. Furthermore, the brokerage firm may put the money into commercial paper, which is only backed by the reputation of the company, making the money market fund nearly as risky as stocks. Thus, the main point of investing in a money market account safety is gone.