Best Money Market Funds Iare investment vehicles that provide investors with a conservative yet yield-oriented option for parking their cash. These funds primarily invest in short-term, highly liquid, and low-risk instruments, such as Treasury bills, commercial paper, and certificates of deposit. The best money market funds are characterized by their stability, safety, and competitive yields relative to traditional savings accounts.
They offer a convenient way for investors to preserve capital while earning a modest return. Additionally, these funds often provide easy access to funds, making them suitable for both short-term and emergency cash needs.
Investors appreciate the low volatility and consistent returns associated with money market funds, making them a reliable choice for those seeking a balance between liquidity and capital preservation in their investment strategy. It’s crucial for investors to carefully assess fees, historical performance, and the fund manager’s reputation when selecting the best money market fund for their financial objectives.
What is Money Market?
The money market is an area of the financial marketplace devoted to short-term borrowing and lending transactions with maturities ranging from overnight to one year. Money markets play an integral part of financial system by facilitating trading of highly liquid and low-risk instruments. Money market participants include financial institutions, corporations, governments and individual investors.
Treasury bills, commercial paper, certificates of deposit and repurchase agreements are the four primary instruments found on the money market. Their primary purposes include meeting short-term funding needs, managing liquidity needs and earning a modest return. Given their short durations and lower credit risk profile, these investments offer investors a secure basis to preserve capital while retaining liquidity.
Here Is List Of Best Money Market Funds In 2024
- Vanguard Treasury Money Market Fund (VUSXX)
- Fidelity Government Cash Reserves (FDRXX)
- American Century Investments Capital Preservation Fund (CPFXX)
- JPMorgan Liquid Assets Money Market Fund (MJLXX)
- Schwab Value Advantage Money Fund — Investor Shares (SWVXX)
- Fidelity Money Market Fund (SPRXX)
- Vanguard Municipal Money Market Fund (VMSXX)
- Fidelity Municipal Money Market Fund (FTEXX)
- Fidelity Money Market Fund (SPRXX)
- Rowe Price U.S. Treasury Money Fund Z
10 Best Money Market Funds In 2024
1. Vanguard Treasury Money Market Fund (VUSXX)
Vanguard Treasury Money Market Fund invests exclusively in Treasury bonds and fully collateralized repurchase agreements (repos), which allow investors to sell securities at one price and buy them back later, usually at a higher one.
At October 30th, U.S. Treasury bills made up 94.10% of this fund’s exposure; its goal is to provide current income while upholding a $1 net asset value.
2. Fidelity Government Cash Reserves (FDRXX)
Fidelity Government Cash Reserves fund’s primary aim is to deliver high levels of current income while protecting capital and liquidity. Although its primary benchmark is the three-month
Treasury bill, T-bills make up less than 29% of its portfolio; agency floating rate securities and U.S. government repurchase agreements make up 17.96% and 45.74%, respectively.
3. American Century Investments Capital Preservation Fund (CPFXX)
This actively managed fund’s primary objective is to maximize safety and liquidity, and its secondary aim is to secure investors with the highest rate of return consistent with safety and liquidity.
To do this, it invests in short-term Treasury securities whose income is exempt from state income taxation.
4. JPMorgan Liquid Assets Money Market Fund (MJLXX)
The JPMorgan Liquid Assets Money Market Fund invests in high-quality short-term assets such as certificates of deposit (28.6%) and financial company commercial paper (15.8%). The fund boasts an experienced management team with over 81 years in industry experience and 44 years managing this particular fund.
5. Schwab Value Advantage Money Fund — Investor Shares (SWVXX)
Schwab Value Advantage Money Fund, as an actively managed fund, boasts an average weighted maturity of just 34.1 days and strives to maximize current income while protecting capital and liquidity.
Top 10 holdings include Federal Reserve Bank of New York, Citigroup Global Markets Inc. and J.P. Morgan Securities.
6. Fidelity Money Market Fund (SPRXX)
This fund seeks to meet its goals of high current income and principal/liquidity preservation by investing primarily in U.S. dollar-denominated money market securities issued by domestic and foreign issuers as well as U.S. government securities (repurchase agreements currently make up 39.81%), along with financial services companies (25+%).
7. Vanguard Municipal Money Market Fund (VMSXX)
Vanguard Municipal Money Market Fund (VMMMF) is among their most conservative investments, designed to deliver current income that’s exempt from federal income tax while remaining liquid with a $1 NAV and 810 holdings that average nine day maturity. It holds $17.1 billion of assets total.
8. Fidelity Municipal Money Market Fund (FTEXX)
Fidelity’s Municipal Money Market Fund typically invests 80% of its assets in municipal securities exempt from federal income tax, while up to 20% may be used for securities with federal- and state-taxable gains.
Variable rate demand notes make up almost three quarters of holdings while municipal bonds account for 4.61 %; although their returns might not be subject to income tax, 49.83% still fall under alternative minimum taxation regulations.
9. Invesco Premier Portfolio Institutional (IPPXX)
Invesco Premier Institutional is our highest yielding fund on this list, thanks to a portfolio that predominantly consists of short-term, high-credit-quality money market instruments denominated in U.S. dollars – such as commercial paper, certificates of deposits, master and promissory notes, municipal securities and repurchase agreements.
10. Rowe Price U.S. Treasury Money Fund Z
T. Rowe Price U.S. Treasury Money Fund is another money market fund on our list where U.S. Treasury repurchase agreements represent the majority of holdings, followed by Treasury bills as the second most-popular category of holdings.
PRTXX’s current holdings will mature within 397 days or less and its weighted average maturity won’t go beyond 120 days.
Which Is Better: Money Market Fund or Savings Account?
An account at a financial institution provides the safest, most liquid way of holding cash, thanks to FDIC insurance covering deposits up to $250,000; funds are instantly accessible at either ATMs or counters.
Insurance also extends to money market accounts (MMAs), which are offered at banks and credit unions; they differ from similarly named money market mutual funds in that they do not fall under FDIC coverage as investments and do not constitute bank accounts.
Money market funds remain relatively risk-free since they invest in cash and securities backed by the US government – such as Treasury bills, notes and repurchase agreements on government obligations.
Both accounts are highly liquid; however, certain funds impose redemption fees or restrict redemption periods for redemptions.
Why to Invest in Money Market Funds?.
Investing in money market funds can be attractive for several reasons:
Capital Preservation: Money market funds focus on short-term, high-quality, and low-risk securities, such as Treasury bills and commercial paper. This emphasis on stability helps preserve the capital you invest.
Liquidity: Money market funds offer high liquidity, allowing investors to quickly convert their fund shares into cash. This makes them suitable for short-term cash needs and emergency funds.
Steady Returns: While money market funds typically provide modest returns, they are often more competitive than traditional savings accounts. The returns are generally stable, making them a reliable option for investors seeking a balance between safety and yield.
Low Volatility: These funds are designed to have minimal price fluctuations, providing a low-volatility investment option. This stability can be particularly appealing for risk-averse investors.
Diversification: Money market funds can serve as a component of a diversified investment portfolio. They provide an alternative to riskier assets like stocks and bonds, helping investors balance their risk exposure.
Short Investment Horizon: If you have a short investment horizon or anticipate needing access to your funds in the near future, money market funds are a suitable choice. Their short-term nature aligns well with short-term financial goals.
Convenience: Money market funds offer simplicity and convenience. They are easy to buy and sell, and the management is typically handled by professional fund managers, relieving investors of the need for active management.
Regulatory Safeguards: Money market funds are subject to regulations that help maintain their stability. For example, they are required to maintain a stable net asset value (NAV) and adhere to certain liquidity standards.
Conclusion The beauty of money market funds lies in their ability to strike a balanced approach between capital preservation, liquidity and yields that remain competitive. These funds, typically invested in short-term, low-risk instruments, provide investors with a safe and convenient place to stash their cash. Money market funds’ focus on safety and their ability to quickly convert shares to cash make them particularly well-suited to short-term financial goals, emergency savings accounts and conservative investors.
Although returns on safe investments may be modest compared to more risky ones, their dependability, low volatility, and regulatory safeguards make these funds very appealing. Investors must thoroughly assess their financial objectives, risk tolerance, and the characteristics of money market funds such as fees and performance before making informed decisions that support their overall investment strategy.
What is a Money Market Fund?
A money market fund is a type of mutual fund that invests in short-term, low-risk securities, such as Treasury bills, commercial paper, and certificates of deposit, with the goal of providing stability, liquidity, and modest returns for investors.
How do Money Market Funds Work?
Money market funds pool money from multiple investors to invest in a diversified portfolio of short-term instruments. They aim to maintain a stable net asset value (NAV) and provide investors with easy access to their funds.
What is the Purpose of Investing in Money Market Funds?
Money market funds are suitable for investors seeking capital preservation, liquidity, and a conservative yield. They serve as a low-risk option for short-term cash needs, emergency funds, or as a component of a diversified investment portfolio
What Types of Securities do Money Market Funds Invest In?
Money market funds typically invest in Treasury bills, commercial paper, certificates of deposit, and other short-term, highly liquid instruments. These securities are chosen for their stability and low credit risk
How Liquid are Money Market Funds?
Money market funds are highly liquid, allowing investors to buy or sell shares on any business day. This liquidity makes them a convenient choice for investors who may need quick access to their funds.
What Returns Can I Expect from Money Market Funds?
Returns from money market funds are generally modest compared to riskier investments. The focus is on stability and preservation of capital rather than aggressive capital appreciation.