Best Money Market Funds in February 2024

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With rates of interest larger than they’ve been in a while, savers and traders are as soon as once more capable of earn first rate charges of return in comparatively protected investments corresponding to cash market funds. Cash market funds put money into short-term securities issued by governments and companies and can be found from a number of completely different brokers and fund managers.

Traders in cash market funds earn earnings, or a yield, from the securities which are held throughout the fund.

Listed here are among the high cash market funds to contemplate to your portfolio.

Prime cash market funds

*Knowledge listed under is as of Feb. 5, 2024.

Vanguard Federal Cash Market Fund (VMFXX)

The Vanguard Federal Cash Market Fund invests in money and short-term securities issued by the U.S. authorities. The fund goals to supply present earnings whereas sustaining a excessive degree of liquidity.

• Yield: 5.28 p.c
• Expense ratio: 0.11 p.c
• Fund belongings: $288.7 billion

JPMorgan Prime Cash Market Fund (VMVXX)

The JPMorgan Prime Cash Market Fund seeks to generate present earnings whereas offering a excessive degree of liquidity and a low volatility of principal. The fund invests in short-term securities that current minimal credit score threat corresponding to U.S. authorities securities, floating-rate debt issued by U.S. and overseas companies and highly-rated business paper.

• Yield: 5.07 p.c
• Expense ratio: 0.50 p.c
• Fund belongings: $82.3 billion

Schwab Worth Benefit Cash Fund (SWVXX)

The Schwab Worth Benefit Cash Fund invests in short-term securities issued by U.S. and overseas entities. The securities could also be issued by governments, companies or monetary establishments. The fund goals to earn the best attainable present earnings whereas sustaining stability and excessive ranges of liquidity.

• Yield: 5.22 p.c
• Expense ratio: 0.34 p.c
• Fund belongings: $175.9 billion

Invesco Authorities Cash Market Fund (INAXX)

The Invesco Authorities Cash Market Fund goals to supply a excessive degree of present earnings whereas sustaining stability and excessive liquidity. It invests basically all of its complete belongings in money, authorities securities and repurchase agreements backed by authorities securities.

• Yield: 5.01 p.c
• Expense ratio: 0.32 p.c
• Fund belongings: $5.5 billion

Constancy Cash Market Fund (SPRXX)

The Constancy Cash Market Fund invests in short-term securities to provide a excessive degree of present earnings whereas sustaining stability and a excessive degree of liquidity. The securities bought could also be issued by home or overseas issuers. The fund additionally invests in repurchase agreements and the business paper of economic establishments.

• Yield: 5.05 p.c
• Expense ratio: 0.42 p.c
• Fund belongings: $102.8 billion

Vanguard Municipal Cash Market Fund (VMSXX)

The Vanguard Municipal Cash Market Fund goals to supply present earnings that’s exempt from federal earnings taxes whereas sustaining stability and a excessive degree of liquidity. As a result of the fund invests in municipal securities which are exempt from federal earnings tax, the yield is decrease than different cash market funds.

• Yield: 3.74 p.c
• Expense ratio: 0.15 p.c
• Fund belongings: $17.2 billion

What’s a cash market mutual fund?

A cash market fund is a mutual fund that invests in short-term securities with little or no credit score threat. These securities could also be issued by governments, companies or monetary establishments that reside within the U.S. or overseas. Cash market funds are thought of to be low-risk investments that provide present earnings primarily based on the prevailing degree of rates of interest.

Cash market funds purpose to keep up a internet asset worth, or NAV, of $1.00, whereas offering a excessive degree of present earnings. Different mutual funds, corresponding to inventory funds, might purpose to extend their NAV as their underlying investments carry out nicely, however cash market funds search stability.

Forms of cash market mutual funds

Cash market funds are sometimes divided into three classes: authorities, prime and municipal. Right here’s what it’s best to learn about every sort.

Cash market funds vs. cash market accounts

You will have seen banks or credit score unions reference cash market accounts and questioned if these are the identical factor as cash market funds. The reply isn’t any. A cash market fund is a mutual fund that invests in short-term securities whereas a cash market account is a product that banks or credit score unions supply to clients that sometimes earns a better charge of curiosity than a regular financial savings account.

Maybe an important distinction between cash market funds and cash market accounts is that cash market funds should not insured by the Federal Deposit Insurance coverage Firms, or FDIC, whereas cash market accounts are FDIC-insured.

Cash market funds include very low threat, however there have been cases the place funds “broke the buck,” which means their NAV dropped under $1.00, corresponding to in the course of the 2008 monetary disaster. In these cases, the fund could also be liquidated and traders may obtain lower than $1.00 per share.

How to decide on a cash market mutual fund

Cash market funds are supplied by quite a lot of completely different monetary establishments corresponding to banks, brokerage companies and mutual fund corporations. Listed here are among the key elements to contemplate when selecting a cash market fund:

• Yield: You’ll wish to evaluate a fund’s yield to different funds within the business to be sure to’re getting the most effective return in your funding.
• Expense ratio: Funds cost an expense ratio, which comes immediately out of the return you in the end earn as an investor. All else being equal, the decrease the expense ratio, the higher it’s for traders.
• Sort of fund: Contemplate whether or not you’d prefer to put money into a authorities, prime or municipal cash market fund. Municipal cash market funds could also be notably interesting for these in excessive tax brackets.
• Different charges: You’ll want to take note of any further charges you could be charged when shopping for and promoting cash market funds. Some brokers might cost mutual fund commissions, whereas others might cost charges for funds from sure fund households.

Backside line

Cash market funds purpose to put money into high-quality short-term securities that present a excessive degree of present earnings whereas sustaining liquidity and stability. The funds might put money into authorities securities in addition to securities issued by U.S. and overseas entities. Municipal cash market funds make investments primarily in tax-exempt securities.

Cash market funds is usually a good match for traders seeking to profit from the present rate of interest surroundings or saving for a short-term aim. Remember the fact that whereas the funds are thought of low threat, they aren’t FDIC-insured.

Editorial Disclaimer: All traders are suggested to conduct their very own unbiased analysis into funding methods earlier than investing resolution. As well as, traders are suggested that previous funding product efficiency isn’t any assure of future worth appreciation.