As interest rates rise, savers and investors have the opportunity to earn decent returns in safe investments like money market funds. These funds invest in short-term securities issued by governments and corporations and can be accessed through various brokers and fund managers.
Investors in money market funds earn income, or yield, from the securities held within the fund.
Here are some of the top money market funds to consider for your portfolio.
Top money market funds
- Vanguard Federal Money Market Fund (VMFXX)
- Schwab Value Advantage Money Fund (SWVXX)
- JPMorgan Prime Money Market Fund (VMVXX)
- Invesco Government Money Market Fund (INAXX)
- Fidelity Money Market Fund (SPRXX)
- Vanguard Municipal Money Market Fund (VMSXX)
*Data listed below is as of August 29, 2024.
Vanguard Federal Money Market Fund (VMFXX)
The Vanguard Federal Money Market Fund invests in cash and short-term securities issued by the U.S. government, aiming to provide current income and high liquidity.
- Yield: 5.26 percent
- Expense ratio: 0.11 percent
- Fund assets: $309.1 billion
- Minimum initial investment: $3,000
Schwab Value Advantage Money Fund (SWVXX)
The Schwab Value Advantage Money Fund invests in short-term securities issued by U.S. and foreign entities, aiming for high current income with stability and liquidity.
- Yield: 5.12 percent
- Expense ratio: 0.34 percent
- Fund assets: $202.2 billion
- Minimum initial investment: None
JPMorgan Prime Money Market Fund (VMVXX)
The JPMorgan Prime Money Market Fund seeks current income, high liquidity, and low volatility by investing in minimal credit risk securities like U.S. government securities and commercial paper.
- Yield: 5.11 percent
- Expense ratio: 0.48 percent
- Fund assets: $80.3 billion
- Minimum initial investment: $1,000
Invesco Government Money Market Fund (INAXX)
The Invesco Government Money Market Fund aims for high current income, stability, and liquidity by investing in cash, government securities, and repurchase agreements.
- Yield: 5.03 percent
- Expense ratio: 0.33 percent
- Fund assets: $5.6 billion
- Minimum initial investment: $1,000
Fidelity Money Market Fund (SPRXX)
The Fidelity Money Market Fund aims for high current income and liquidity by investing in short-term securities from domestic and foreign issuers, as well as repurchase agreements and commercial paper.
- Yield: 5.04 percent
- Expense ratio: 0.42 percent
- Fund assets: $113.1 billion
- Minimum initial investment: None
Vanguard Municipal Money Market Fund (VMSXX)
The Vanguard Municipal Money Market Fund aims to provide tax-exempt current income with stability and liquidity by investing in municipal securities.
- Yield: 3.10 percent
- Expense ratio: 0.15 percent
- Fund assets: $17.6 billion
- Minimum initial investment: $3,000
What is a money market mutual fund?
A money market fund is a mutual fund that invests in short-term securities with minimal credit risk, offering current income based on prevailing interest rates. These funds aim to maintain a net asset value of $1.00 while providing stability and liquidity.
Money market funds are categorized as government, prime, or municipal, each with its own investment focus and risk profile.
Types of money market mutual funds
Money market funds are typically classified as government, prime, or municipal funds, each with its own investment strategy and risk profile:
- Government
- Invest in cash, U.S. Treasury securities, and repurchase agreements collateralized by U.S. Treasury securities.
- Prime
- Invest in government securities, commercial paper, certificates of deposit, and short-term securities from domestic and foreign corporations.
- Municipal
- Invest primarily in securities exempt from federal income tax.
Money market funds vs. money market accounts
Money market funds and money market accounts are not the same. While money market funds invest in short-term securities, money market accounts are bank products that offer higher interest rates than standard savings accounts and are FDIC-insured.
When choosing a money market fund, consider factors like yield, expense ratio, fund type, and additional fees.
Bottom line
Money market funds provide a safe investment option for earning current income with stability and liquidity. Consider your investment goals and risk tolerance when selecting a money market fund.
Editorial Disclaimer: Conduct independent research before making investment decisions. Past performance is not indicative of future results.