Money market funds are one option for investing short-term cash. While they are not FDIC-insured (unlike money market accounts which are), they are considered a reasonably safe option for holding cash.
Below we list money market funds by type (Prime, Government, Muni), listed based on their 7-day SEC yield. While we do our best to keep this information current, please confirm yields and all other terms directly with the money market fund provider before making an investment decision.
Prime Money Market Funds
Prime money funds generally invest in short-term obligations issued by corporations, governments, and banks, including asset-backed or unsecured commercial paper and repurchase agreements.
Note: Vanguard does not offer a prime money fund. In 2020, Vanguard reorganized its Prime Money Market Fund into its Vanguard Cash Reserves Federal Money Market Fund (see below under Government Money Market Funds).
5.05%
0.19%
$1,000,000
4.90%
0.30%
$100,000
4.89%
0.34%
$0
4.83%
0.36%
$1,000
Government Money Market Funds
Government money market funds invest primarily in securities backed by the U.S. government. These funds generally hold U.S. Treasury and federal agency debt instruments and repurchase agreements collateralized by government securities.
5.04%
0.10%
$3,000
5.02%
0.11%
$3,000
4.89%
0.09%
$3,000
4.87%
0.19%
$1,000,000
4.83%
%
$100,000
4.78%
0.34%
$0
4.72%
0.34%
$0
4.50%
0.42%
$0
4.05%
%
$0
Municipal Money Market Funds
Municipal money funds generally invest in municipal securities that are normally exempt from federal personal income taxes.
2.83%
0.15%
$3,000
2.76%
0.16%
$3,000
2.72%
0.26%
$0
2.37%
0.16%
$3,000
What is a Money Market Fund?
A money market fund is a type of mutual fund that invests in short-term, high-quality debt securities with the primary objectives of preserving capital and providing liquidity. These funds typically invest like U.S. Treasury bills, agency debt, commercial paper, certificates of deposit (CDs), and repurchase agreements.
Money market funds are designed to maintain a stable net asset value (NAV), usually at $1 per share, which makes them an attractive option for investors seeking a relatively safe, short-term investment with a focus on capital preservation and liquidity. They often provide a slightly higher return than traditional bank savings accounts but generally have lower returns than other types of mutual funds, as they invest in low-risk securities.
However, it's important to note that money market funds are not entirely risk-free. While they are considered low-risk, there is still a possibility of losing money, particularly in times of economic stress or rising interest rates. Additionally, money market funds are not insured by the Federal Deposit Insurance Corporation (FDIC), which means that investors could potentially lose money if the fund's investments were to default.
Sources
We considered the following sources in preparing this content:
- What are money market funds? (Fidelity)
- Money Market Mutual Funds: Policy Concerns and Reform Options (Congressional Research Service)
- § 270.2a-7 Money market funds (Code of Federal Regulations)
- Investor Base and Prime Money Market Fund Behavior (Federal Reserve)
- The Money Market Fund websites listed above for each fund
