The volatility of our modern financial markets can be scary. A 150-point fluctuation in the Dow Jones Industrial Index can be a daily occurrence, and investors are wise to consider every investment option available. So-called “insured” money market funds could provide some shelter in a volatile world, and help risk-weary investors sleep better at night.

First, it’s important to clarify some terms. Technically speaking, money market funds are not insured by the FDIC; Insured money market accounts are typically held at a bank, and are similar to a normal savings account. In these accounts, the balance is insured by the FDIC up to $250,000.

It is tempting to salt away large retirement balances in one of these vehicles, and ignore the nasty financial headlines. Typical investor thinking runs this way: The returns are steady, the risk seems low, and in comparison to the high risk of securities, there is a virtual guarantee that the investment capital will remain intact in times of global financial crisis...right?

Take caution. There are several caveats to this story. The first and foremost is the potential return: Getting less than a 1% return is a very real possibility. Even with the magic of compounding, inflation could easily outpace your investment, In real terms (taking into account the associated fees and taxes), this virtually guarantees that the purchasing power of your money could be shrinking.

And the fees can be insidious at even the best money market accounts. Since the financial crisis, banks tinker with their fee schedule all the time. For a small investor, it is completely plausible that a 30 dollar fee could wreck your less than 1% investment return. Banks will mail out their fee change schedules in advance, but it would be easy to miss or ignore one of these small print mailings. Pay close attention to changing regulations, and question the bank early and often in regards to their fee schedules. Remember, fees can overwhelm even the best money market rate.

Taxes are another matter. Evaluate your insured money market investment return with your personal tax situation in mind, and apply your marginal tax rate to your 1-2% return when choosing an account. Also, remember that taxes aren’t deferred with these investments; taxes are usually due immediately, whether you draw down the balance or not.

Money market funds are not insured, whereas money market savings accounts are. Insured investments can provide stable values and a measure of safety in a confusing market, but this safety carries a heavy price. Evaluate these accounts carefully, and be sure to consider inflation, taxes, and the fee schedule at your bank.