Opening your quarterly investment statement can be a source of great stress. Whatever your investment basket might hold, securities, mortgages, commodities, or debt, there are daily market movements that flash up and down quickly enough to make you dizzy. In this environment, money market savings accounts can look tempting. They can be a relatively safe place to park cash, and are typically insured by the FDIC for up to $250,000. What could be better than knowing you are insured from loss?

Not so fast. There are lots of pitfalls even with the best money market accounts, and it’s important for every investor to be aware of the trade offs that come along with the associated low risk.

Let us not forget the taxes. For the most part, these accounts are taxable immediately. Each year, your bank will mail out a nasty letter in late January called a 1099. This form lines out how much profit should be applied to your tax return, and it doesn’t get reduced by banking fees or inflation. While many investments evaluate their profit or loss when realized, money market savings accounts are taxable when the dividend is paid. So, if your marginal tax rate is 39%, remember that Uncle Sam gets his portion every year, whether you make withdrawals or not.

In addition, there are banking fees to consider. Banks have forgotten their complacency of the nineties, and constantly figure out new ways to apply fees to your account. 12b-1 fees, once a charmingly transparent grab, are mostly a fixture of the past. But more substantial monthly maintenance fees are growing more common every day, along with minimum balance charges, debit fees, and balance transfer charges. Any fee that banks might contemplate applying to your checking account, could plausibly apply to your money market savings account.

The biggest pitfall isn’t so easy to see: Inflation.

With a careful eye on account selection and taxes, right now the best online banking money market accounts can appear to make a slight profit. But when you take into account inflation, the losses appear, especially over a long period of time. As measured by the CPI in July 2010, inflation was at 1.2%. Even if you have a huge balance that receives the most preferential (aka the best money market interest rates) treatment, the triple stabs taken by inflation, taxes and fees will easily show that the purchasing power of your money is shrinking.

Money market savings accounts can provide a mental respite to investors that are weary of the ongoing global financial crisis, but long term exposure in these instruments can yield real losses that make that stability an expensive choice.