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.