9 Best Money Market Funds for January 2024
Mutual funds are a popular choice for investors who want a lower-risk alternative to buying individual securities. Unlike money market bank accounts, which are a type of savings account that earns interest on deposits, money market funds invest some of their holdings in low-risk securities in addition to cash.
As a result, money market funds are riskier than money market bank accounts, but they’re a more diverse way to invest, and they have the potential to produce larger returns. Money market funds yield 5.57% (gross), on average, according to the most recent Securities and Exchange Commission report. Money market account rates averaged just 0.64% as of Dec. 18, 2023, according to the Federal Deposit Insurance Corp.
See: 3 Things You Must Do When Your Savings Reach $50,000
Best Money Market Funds for January 2024
GOBankingRates researched the best money market funds for January 2024. The picks below are based on factors like seven-day yields, expenses and fees, minimum investment and absence of sales loads and redemption fees. They include popular funds from major fund families like Vanguard and Fidelity.
1. Vanguard Treasury Money Market Fund (VUSXX)
The Vanguard Treasury Money Market Fund invests strictly in Treasury bonds and fully collateralized repurchase agreements, which are contracts to sell the security at a certain price and buy it back later, usually at a higher price. As of Jan. 13, U.S. Treasury bills make up its largest exposure, at 98.30%. It’s an actively managed fund that aims to provide current income and maintain a $1 net asset value.
Fund Type: Government
7-Day Yield: 5.29%
Net Assets: $64.5 billion
Expense Ratio: 0.09%
Minimum Investment: $3,000
Why We Like It: A low expense ratio and high yield make this fund a win-win.
2. Fidelity Government Cash Reserves (FDRXX)
The goal of the Fidelity Government Cash Reserves fund is to provide a high level of current income while preserving capital and liquidity. Although the fund’s primary benchmark is the three-month Treasury bill, T-bills make up less than one-third of the portfolio. Agency floating rate securities and U.S. government repurchase agreements make up most of the rest — 15.54% and 48.52%, respectively.
Fund Type: Government
7-Day Yield: 4.99%
Net Assets: $232.43 billion
Expense Ratio: 0.34%
Minimum Investment: $0
Why We Like It: A mix of investments in this fund’s portfolio successfully balances capital preservation and liquidity.
3. American Century Investments Capital Preservation Fund (CPFXX)
This actively managed fund’s primary goal is to provide maximum safety and liquidity. Secondarily, it looks to earn shareholders the highest rate of return consistent with safety and liquidity. It does that by investing in short-term Treasury securities, income from which is exempt from state income tax.
Fund Type: Government
7-Day Yield: 4.91%
Net Assets: $2.3 billion
Expense Ratio: 0.48%
Minimum Investment: $500 with $100 automatic investment, $2,500 without automatic investment
Why We Like It: High liquidity and a low minimum investment make this fund a solid conservative investment.
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 (26.4%) and financial company commercial paper (15.2%). The fund has a highly experienced management team with a combined 80-plus years of industry experience and over 40 years of experience managing this fund.
Fund Type: Prime
7-Day Yield: 5.12%
Net Assets: $59.31 billion
Expense Ratio: 0.59% (net)
Minimum Investment: $1,000 initially, then $50 per subsequent investment
Why We Like It: A highly experienced management team keeps this fund producing impressive yields.
5. Schwab Value Advantage Money Fund — Investor Shares (SWVXX)
As an actively managed fund, the Schwab Value Advantage Money Fund has a weighted average maturity of just 36.8 days. It aims to achieve the highest current income possible while preserving capital and liquidity. Top 10 holdings include the Federal Reserve Bank of New York, Citigroup Global Markets Inc. and J.P. Morgan Securities.
Fund Type: Prime
7-Day Yield: 5.23%
Net Assets: $172.28 billion
Expense Ratio: 0.34%
Minimum Investment: $0
Why We Like It: Debt from foreign issuers rounds out SWVXX’s portfolio.
6. Fidelity Money Market Fund (SPRXX)
This fund seeks to achieve its goals of high current income and principal and liquidity preservation by investing in U.S. dollar-denominated money market securities of domestic and foreign issuers as well as U.S. government securities and repurchase agreements — the latter of which currently make up 38.74% of the portfolio. Over 25% of assets may be invested in financial services industries.
Fund Type: Prime
7-Day Yield: 5.10%
Net Assets: $100.23 billion
Expense Ratio: 0.42%
Minimum Investment: $0
Why We Like It: As a prime fund, SPRXX can invest in a wider range of assets compared to tax-free municipal and government funds.
7. Vanguard Municipal Money Market Fund (VMSXX)
The Vanguard Municipal Money Market Fund is one of Vanguard’s most conservative investments. Its objective is to provide current income that’s exempt from federal income tax while maintaining liquidity and a $1 NAV. Its $17.7 billion in assets include 829 holdings with an average maturity of 11 days.
Fund Type: Tax-free municipal
7-Day Yield: 2.00%
Net Assets: $17.7 billion
Expense Ratio: 0.15%
Minimum Investment: $3,000
Why We Like It: This highly conservative fund is about as safe an investment as you can have in an investment account.
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. Up to 20% of assets may be invested in securities that produce federal- and state-taxable gains. Variable-rate demand notes make up about three-quarters of the fund’s holdings, while municipal bonds comprise 5.66%. Returns from these securities might not be subject to federal income tax, but 52.25% are subject to alternative minimum tax.
Fund Type: Tax-free municipal
7-Day Yield: 3.8%
Net Assets: $3.81 billion
Expense Ratio: 0.42%
Minimum Investment: $0
Why We Like It: With no investment minimum, FTEXX is a highly accessible way to invest in a way that minimizes tax liability.
9. Fidelity Government Money Market Fund (SPAXX)
As a fund that invests almost exclusively in U.S. government securities, such as Treasury bills and coupons, and fully collateralized repurchase agreements, the Fidelity Government Money Market Fund is one of the safest investments you can buy. While SPAXX’s average annual return is just 1.01% over 10 years, one-year returns are much better — 4.78%.
Fund Type: Government
7-Day Yield: 4.98%
Net Assets: $309 billion
Expense Ratio: 0.42%
Minimum Investment: $0
Why We Like It: This fund is about as close to risk-free as you can get, and there’s no minimum to invest.
What Are Money Market Funds?
Money market funds, like other mutual funds, invest in a basket of securities — in this case, high-quality, short-term debt securities such as government bonds and certificates of deposit. Retail money market funds — those that are available to individual, rather than institutional, investors — generally maintain a stable $1 share price, or net asset value. Investment returns come in the form of dividends, which rise and fall with short-term interest rates.
Types of Money Market Funds
Retail investors have a choice of three different types of money market funds.
Government and Treasury Funds
Government and Treasury money market funds are the most common type. They invest at least 99.5% of their total assets in cash, government securities or repurchase agreements, which the Securities and Exchange Commission notes are fully collateralized with government securities. At least 80% of the assets must be invested in U.S. Treasury securities, according to Fidelity. These are the best funds for investors who want the least amount of risk.
Prime Funds
Prime money market funds can invest in any of a variety of money market instruments, including corporate bonds and certificates of deposit, denominated in U.S. dollars. Because they hold assets other than cash and Treasury securities, prime funds are a little riskier than government money market funds, but they do a better job of diversifying your portfolio and might generate larger returns.
Tax-Exempt Funds
Tax-exempt funds, also known as municipal money market funds, typically invest 80% of their assets in municipal securities, such as bonds, whose interest is exempt from federal and/or state income tax. Although they tend to have fewer assets and yield less than government and prime funds, municipal funds’ tax incentives make them a good choice for investors in high tax brackets.
What Is the Best Money Market Fund in the US?
Any of the funds in this roundup could be a good choice for certain investors, but because different investors have different financial goals and risk tolerances, no one fund is best for everyone. For example, the Fidelity Municipal Money Market Fund might be the best one for an investor looking for a tax-advantaged investment, as the dividends are exempt from federal income tax. An investor who prioritizes income generation, on the other hand, might consider the Schwab Value Advantage Money Fund to be the best money market fund.
Should You Invest In a Money Market Fund?
The major benefit of a money market fund is that it’s one of the safest investments you can purchase through a brokerage. However, safe doesn’t mean risk-free, especially for funds holding assets other than cash or Treasury securities. Funds are not insured against losses like money market savings accounts are, and while money market fund yields are much higher than average money market account rates, high-yielding money market accounts rival fund yields with no risk of losing your money — and in many cases, with no fees.
Still, a fund might be your best bet if you need to diversify your portfolio and want a low-risk investment with no restrictions on how frequently you access your funds. If you’re in a high tax bracket, money market funds provide an additional benefit — the opportunity to earn yields not subject to federal income tax.
FAQ
For the right investor, money market funds are a great way to generate income and diversify your portfolio. But it's not always easy to decide which fund is best for you. These frequently asked questions might help.
What are some popular money market funds?
Big-name brokerages all have popular money market funds. They include Fidelity Government Cash Reserves, JPMorgan Liquid Assets Money Market Fund and Schwab Value Advantage Money Fund.
Is the Vanguard Federal Money Market Fund safe?
The Vanguard Federal Money Market Fund is about as safe as a money market fund can be. It invests at least 99.5% of its assets in cash, U.S. government securities and repurchase agreements backed by cash or government securities. Government securities are backed by the full faith and credit of the U.S. government, so they're the next best thing to cash in terms of safety.
What is the safest Fidelity money market fund?
It's difficult to give a definitive answer because the composition of money market funds changes whenever the fund managers buy or sell holdings. That said, the Fidelity Treasury Money Market Fund is highly conservative because it invests at least 99.5% of its assets in cash, U.S. government securities and/or repurchase agreements for those securities.
Data was compiled on Jan. 13, 2024, and is subject to change.
Editorial Note: This content is not provided by any entity covered in this article. Any opinions, analyses, reviews, ratings or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by any entity named in this article.
This article originally appeared on GOBankingRates.com: 9 Best Money Market Funds for January 2024
