Top Rated Money Market Mutual Funds are an extremely useful investment choice for any of your short-term goals. Let it be buying a car of your choice, saving for a down payment for a house, or a trip to your favorite destination. Still, blindly investing in an MMMF without proper guidance can cause you financial loss and might leave your expectations unmatched. Here, we are down to discuss the top rated money market mutual funds.
What are Money Market Mutual Funds?
Top Rated Money Market Mutual Funds are fixed-income investments that are mainly designed to cover uncertainties of the stock market to a certain level standing up to the perceived safety standards. These are liquid alternatives to bank deposits with potentially higher returns. This is similar to Treasury bills and certificates of deposit, as these mature within a year. These are short-term investments with minimal credit risk accessed through high-rated or government-backed institutions.
Types of Money Market Mutual Funds
The money market mutual funds in the financial market fall under three broad categories each following a different approach for taxes and investment profiles. These are:
- Government Money Market Mutual Funds
The government’s market funds are fully taxed according to federal income tax regulations. Yet IRAs, which are individual retirement accounts that are tax-advantaged, are exempted from the same. Also, incomes generated by Treasury bills and some other government-backed assets are tax-free.
This MMMF invests a greater portion into short-term government debt, cash, and other government-backed sources. - Municipal Money Market Mutual Funds
These are tax-free mutual funds to invest in municipal debts for the short term. The income generated by these funds is similar to those of municipal bonds and therefore is not subject to federal income taxes and sometimes state income taxes. State income taxes are not incurred by many of the states from these funds. - Prime Money Market Mutual Funds
These are investments made in short-term corporate debt instead of any form of government debt. Here the income generated is similar to those from corporate bonds. This implies that unless you invest specifically in a tax-advantaged account, the investments are taxable.
Evaluation criteria
As the financial market as of the current year, has several MMMFs, the choice regarding which MMMF to invest in is harder to make. Yet assessing these based on your goal and comparing them under relevant traits could give you the right choice.
A few of the traits to consider are:
- Low minimum and fees – analyze your options based on the minimum required investment amount so that you don’t have to make a hefty payment at the start of the investment. Further, see the expense ratios and choose from those having lower numbers.
- Wider Availability – Despite offering high yields and low fees, make sure that the funds are available not only through specific advisors, brokerages, or workplace retirement plans.
- Larger portfolios – larger portfolios offer higher asset levels and try not to choose MMMFs with lower assets.
- Maximum possible yield – the industry standard for making comparisons among funds is the seven-day yield. It is evaluated by adding the fund distribution and appreciation and then subtracting average fees over seven days. This average value is projected for the upcoming year(12 months ahead).
Top rated Money Market Mutual Funds
Vanguard Federal Money Market Fund (VMFXX)
VMFXX is one of the oldest in Vanguard’s MMMFs that has survived several economic struggles in the finance market. This is a very conservative and straightforward money market fund that is affordable to invest in with a minimal expense ratio. With a great economy of scale, it has gathered a total of $270 billion in AUM.
- Pros – VMFXX stands out for its very low expense ratio of 0.11% and a high AUM (Assets Under Management) which is the total market value of all the investments that a fund handles. The track records date back to July 1981 and there is no redemption, purchase, or 12-1 fees of any sort.
- Cons – there are several factors to look out for including the higher minimum investment requirement of $3,000. It has been observed that the returns offered are lower in comparison with stocks and bonds. In addition to these, the yields swing with changes in the interest rate.
Vanguard Treasury Money Market Funds (VUSXX)
Another MMMF from the Vanguard lineage, VUSXX is an alternative to VMFXX. The expense ratio for VUSXX is 0.09% and has a seven-day SEC yield of 5.3%. Its portfolio is mainly composed of Treasury bills, and repurchase agreements although functionally similar to VMFXX. If you are an investor buying VUSXX in a taxable account, expect local and state income taxes at least on certain of your income.
- Pros – Similar to VMFXX, these also don’t charge any purchase, redemption, or 12b-1 fee. The expense ratio is 0.09%, which is even lower than VMFXX. A high AUM is offered here as well with a track record dating back to December 1992.
- Cons – The minimum investment required is high the same as VMFXX, which is $3,000. Yields fluctuate with changes in interest rates and have historically lower returns to offer similar to VMFXX.
Vanguard Municipal Money Market Funds (VMSXX)
These are Vanguard’s alternative MMMFs for receiving interest income that is not subject to federal taxes with a seven-day SEC yield of 3.5%. These are significant when you have invested in a taxable account like a brokerage account and fall in a high-tax bracket. These are similar to the municipal bond fund variants of taxable bond funds.
- Pros – the expense ratio is 0.15%, though slightly over that of other Vanguard’s MMMFs discussed so far, it is still lower than other options.
- Cons – here as well, you need to make a minimum investment of $3,000.
Schwab Value Advantage Money Fund – Investor Shares (SWVXX)
Functioning since April 1992, this MMMF is available to those on Charles Schwab’s brokerage platform. This is one of Schwab’s prime MMMFs that has over $162 billion AUM since its launch. The portfolio is composed of commercial paper, time deposits, certificates of deposit, Treasury, and repurchase agreements. With a lower fee, it manages to gain a 30-day SEC yield of 5.3% and therefore the increased interest of investors towards this.
- Pros – there are no 12b-1 fees or sales load associated with SWVXX. It seems attractive over the others as there are no minimum investments required. It offers high total assets with a long track record that dates back to 1992.
- Cons – it charges a higher expense ratio of 0.34% although the yields are subject to fluctuations based on the interest rate. In comparison with stocks and bonds, the returns are lower.
Fidelity Money Market Fund (SPRXX)
SPRXX is a well-capitalized MMMF that has managed to attract an AUM of over $10 billion since 1989. These long-standing funds can be purchased by investors through Fidelity’s platform and the investments can be made in the form of Treasury bills and repurchase agreements as well as in the form of commercial paper and certificates of deposit, unlike the funds by Vanguard.
- Pros – No transaction fees or 12b-1 fees are charged and no minimum investment requirements. It has a track record dating back to January 1989 and also offers a high AUM.
- Cons – The 0.42% expense ratio is a higher charge comparatively along with a lower seven-day SEC yield of 5.1%. Fluctuating yields and lower returns are other issues while considering this MMMF.
Fidelity Government Money Market Fund (SPAXX)
With a higher total net asset of around $267.99 billion, SPAXX launched by Fidelity in 1990, which is one of the top MMMFs that focuses on higher returns. Apart from this, SPAXX also offers high liquidity and investments are made as short-term assets such as cash, repurchase agreements, and so on.
- Pros – it gives a higher credit quality, better than prime money market funds. There are no minimum investment constraints, transaction fees, or 12b-1 fees.
- Cons – along with a higher expense ratio, the yields can be highly influenced by the interest rate. The historically lower returns in comparison with stocks and bonds are another reason to consider other MMMFs.
BlackRock Wealth Liquid Environmentally Aware Fund (PINXX)
PINXX focuses on environmental, social, and governance, or ESG considerations to be incorporated into portfolios and hence facilitate better capital management. Repurchase agreements, time deposits, certificates of deposit, and commercial paper are the various assets held by PINXX. Being a prime money market fund, the issuer is screened according to the proprietary environmental criteria.
- Pros – Avoid exposure to companies having a controversial business background based on MSCI. Controversial and nuclear weapons, tobacco, oil sands, and thermal coal are a few of these.
- Cons – a minimum investment requirement exists although the amount of $1,000 is lesser than the requirement of other MMMFs. This is a drawback as there exist MMMFs that do not demand any at all. Similar to SPRXX, the seven-day SEC yield is 5.1%, which is lower.
Comparison of Top-Rated Money Market Mutual Funds
Based on the evaluation criteria, the Top Rated Money Market Mutual Funds are discussed above. These MMMFs are retail funds that offer wider availability and do not demand liquidity fees or put forward redemption limits and have higher asset levels. All these funds demand either no minimum investment or not over $3,000. Also, the expense ratios are less than 0.50% with higher yields over 5.0%.
| MONEY MARKET FUND | SYMBOL | EXPENSE RATIO | YIELD |
| Vanguard Federal Money Market Fund | VMFXX | 0.11% | 5.3% |
| Vanguard Treasury Money Market Fund | VUSXX | 0.09% | 5.3% |
| Vanguard Municipal Money Market Fund | VMSXX | 0.15% | 3.5% |
| Fidelity Money Market Fund | SPRXX | 0.42% | 5.1% |
| Schwab Value Advantage Money Fund – Investor Shares | SWVXX | 0.34% | 5.3% |
| BlackRock Wealth Liquid Environmentally Aware Fund | PINXX | 0.49% | 5.1% |
Conclusion
In today’s uncertain and fluctuating economic climate, money market mutual funds are an alternative to risky bank deposits and highly volatile stocks. Choose from among the Top Rated Money Market Mutual Funds to have maximum benefits.
Though these are a better tool at times of market uncertainty, weigh their pros and cons before investing in these as they might not align with every investment goal. Consider other options like high-yield savings accounts, short-term bond funds, or certificates of deposit(CDs) if MMMFs aren’t for you.
Understand the full spectrum of options to make informed decisions regarding your financial future while choosing the Top Rated Money Market Mutual Funds.
Also Read: Mutual Fund: A Beginners Guide
Achieving Your Financial Goals: A Roadmap to Financial Success in 2024
Frequently Asked Questions
Are money market funds safe?
Yes, money market funds are generally considered safe as they invest in short-term, low-risk securities. They aim to maintain a stable net asset value (NAV) of $1 per share, providing capital preservation. However, they offer lower returns compared to riskier investments, making them suitable for investors seeking stability and liquidity rather than high yields.
Is VMFXX a good investment?
Yes, VMFXX being a government money market mutual fund, is secure and has a high-quality portfolio with a standard 5.3% seve-day SEC yield and therefore is a good investment. VMFXX is a good investment for you depends on your investment goals, risk tolerance, and time horizon. If you prioritize capital preservation and have a short-term investment horizon, a money market fund like VMFXX may be suitable.
What is the best MF to invest in?
The best mutual funds can be identified based on the track record, the longer the track record of delivering consistent returns, the better the MF. Popular mutual fund categories include equity funds, debt funds, and hybrid funds, each serving different investment objectives. Always consider your personal financial situation and conduct due diligence to select a fund that aligns with your goals and risk profile.
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