The best money market mutual funds September 2024
If you’re looking to earn a competitive interest rate on your cash in a relatively low-risk investment, you might want to consider money market mutual funds. With yields generally superior to big brick-and-mortar banks and competitive with high-yield savings accounts and certificates of deposit (CDs), money market funds can make sense for the right type of investor.
Methodology
To assemble our list of the eight best money market mutual funds, we narrowed the playing field by applying several weighted factors, giving preference to yield and expense ratio because they directly impact income, which is typically what investors seek in these funds.
At the end of our discussion of the best money market mutual funds for 2024, view our complete methodology that explains how we filtered our list of the eight best funds.
Show summary
Vanguard Federal Money Market Fund
Why we picked it
The largest fund on our list with $305 billion in assets, the Vanguard Federal Money Market Fund (VMFXX) has the third-lowest expense ratio, after its Vanguard counterparts.
This Vanguard fund invests primarily in US Treasuries and other government-backed obligations. As Vanguard notes in its marketing, this makes it “one of the most conservative investment options offered by Vanguard” and an appropriate place for “short-term savings.” Vanguard offers the Federal Money Market Fund as the default settlement fund (the account where you keep your uninvested cash) for Vanguard retail brokerage clients. The fund owns debt with a weighted average maturity of 23 days.
Pros
- Large fund with net assets at $305 billion
- Very high yield
- Very low expense ratio
Cons
- Relatively high minimum investment
Who should use it
Vanguard brokerage account clients have their cash automatically allocated to this default settlement fund. It’s highly liquid and very conservative, and the current yield is competitive with other short-term savings vehicles. Per Vanguard, “Investors who have a short-term savings goal and are interested in a fund that invests in securities issued by the U.S. government or its agencies may wish to consider this option.”
Schwab Value Advantage Money Fund Investor Shares
Why we picked it
Charles Schwab’s Value Advantage Money Fund Investor Shares (SWVXX) took second place on our list, thanks, in large part, to its low barrier to entry. With a yield competitive with and expense ratio higher than the Vanguard funds on our list, the fund has no minimum investment requirement, making it more accessible to small investors.
This fund has a weighted average maturity of 28 days. The fund invests primarily in short-term domestic and foreign money market instruments, including CDs, government-backed securities and repurchase agreements. Repurchase agreements are somewhat complicated arrangements between two entities that provide liquidity for money market mutual funds.
Pros
- Large fund with share class net assets at $195 billion
- No minimum investment requirement
Cons
- Relatively high expense ratio
Who should use it
Charles Schwab investors in need of a highly liquid fund with a competitive yield and a tolerable expense ratio should consider keeping their cash in this money market fund.
Vanguard Cash Reserves Federal Money Market Fund Admiral Shares
Why we picked it
Neck and neck with the next fund on our list — also a Vanguard fund — the Vanguard Cash Reserves Federal Money Market Fund (VMRXX) was the highest-yielding name on our list when we crunched the numbers. However, as we note later in this guide, and Vanguard points out in its own fund literature, “the amount of income that a shareholder may receive will be largely dependent on the current interest rate environment.” This makes the fund — and money market mutual funds in general — potentially solid choices for investors looking for a place to park “short-term savings.”
This fund invests 99.5% of its assets in cash, government securities and government-backed repurchase agreements. More than 25% of its portfolio is invested in securities floated by the financial services sector. The fund has an average weighted maturity of 24 days.
Pros
- Highest yield on our list
- Very low expense ratio
Cons
- Relatively high minimum investment
Who should use it
This fund is nearly identical to Vanguard Federal Money Market Fund, except with a slightly different portfolio allocation, which includes financial services sector securities, and a fractionally lower expense ratio.
Vanguard Treasury Money Market Fund
Why we picked it
The Vanguard Treasury Money Market Fund (VUSXX) has the lowest expense ratio of all of the funds on our list. This comes as no surprise, given that Vanguard is known for low expense ratios across its investment options. Expense ratios on Vanguard money market mutual funds range between 0.09% and 0.16%.
This fund only invests in US Treasuries and repurchase agreements insured by the federal government, making it among the safest in a category of relatively safe investments. The weighted average maturity of the fund’s holdings is 31 days.
Pros
- Tied for second-highest yield on our list
- Lowest expense ratio on our list
Cons
- Relatively high minimum investment
Who should use it
Like the other Vanguard funds on this list, this is a conservative choice for investors who want to earn a strong yield on their cash with a very low expense ratio. The main difference between this fund and the two others is that the Vanguard Treasury Money Market Fund is almost entirely invested in US Treasury bills.
PIMCO Government Money Market Fund Class A
Why we picked it
The PIMCO Government Money Market Fund Class A (AMAXX) is the smallest fund on our list of the top eight money market mutual funds for 2024, with share class net assets of $1.7 billion. What it lacks in size, it makes up for with its competitive 5.12% yield, low expense ratio and a $1,000 minimum initial investment, placing it in between Schwab on the low end and Vanguard on the high end of this criterion.
The fund invests exclusively in government-backed obligations, such as Treasury bills, and repurchase agreements. Its weighted average maturity does not exceed 60 days.
Pros
- Yield competitive with money market funds and other short-term investments
- Relatively low expense ratio
Cons
- Relatively low share class net assets
Who should use it
Investors interested in a stable, liquid money market fund with a competitive yield and relatively low expense ratio for short-term investment goals might consider using this fund.
Schwab Government Money Fund Investor Shares (SNVXX)
Why we picked it
Like the other Schwab funds on our list, Charles Schwab’s Government Money Fund Investor Shares (SNVXX) made the cut thanks, in large part, to its accessibility. There’s no minimum investment, and the fund competitively yields just over 5%, which helps offset its relatively high 0.34% expense ratio.
SNVXX carries a weighted average maturity of 32.8 days. The fund keeps 99.5% of its portfolio in cash, US government securities and repurchase agreements backed by the US government.
Pros
- No minimum investment
- Competitive yield
Cons
- Relatively high expense ratio
Who should use it?
Investors who seek a competitive yield but quick access to their cash should consider buying this money market fund.
Schwab Treasury Obligations Money Fund Investor Shares (SNOXX)
Why we picked it
Nearly a carbon copy of SNVXX, the Schwab Treasury Obligations Money Fund Investor Shares (SNOXX) invests 99.5% of its portfolio in cash, US government securities and repurchase agreements collateralized by the US government. Its yield (5.01%), expense ratio (0.34%) and minimum investment amount ($0) are almost identical to the other Schwab funds that made our list.
While SNOXX and SNVXX both invest in a mix of US Treasury debt and repurchase agreements, the difference between the two is that, as of July 31, 2024, SNOXX only invests in repurchase agreements collateralized by the Treasury, whereas SNVXX holds repos backed by the Treasury and other US government entities.
SNOXX has a weighted average maturity of 33.4 days.
Pros
- No minimum investment
- Competitive yield
Cons
- Relatively high expense ratio
Who should use it?
Consider investing in the SNOXX money market fund if you want liquidity alongside a competitive interest rate.
Schwab US Treasury Money Fund Investor Shares (SNSXX)
Why we picked it
The Schwab US Treasury Money Fund Investor Shares (SNSXX) yields a hair over 5%, maintains an expense ratio of 0.34% and requires no minimum investment. SNSXX invests nearly all of its assets, as of July 31, 2024, in a portfolio of US Treasury debt (bills and notes) with maturities ranging from a few weeks to two years. This concentration in US Treasuries only is the primary distinction between it and its Schwab counterparts, SNVXX and SNOXX.
The fund has an average weighted maturity of 46.9 days.
Pros
- No minimum investment
- Competitive yield
Cons
- Relatively high expense ratio
Who should use it?
If you favor keeping cash in US Treasury bills and notes and seek liquidity and a competitive yield simultaneously, SNSXX might make sense for you.
Our picks at a glance
Why consider a money market fund?
- Income: Money market funds can provide a competitive interest rate on your savings.
- Liquidity: Most money market funds give investors fee-free, same or next-business-day access to their money.
- An emergency fund: Given the income and liquidity benefits, money market funds can be good places to keep your emergency money safe, accessible and earning interest that’s superior to most checking and traditional savings accounts.
- To park cash: Many stock market investors use money market funds to keep their uninvested cash earning interest as they wait for buying opportunities.
All of these considerations help explain why assets held in money market funds have skyrocketed in recent years:
What is a money market mutual fund?
A money market mutual fund is an investment that generally offers much higher interest rates than large, national banks and is competitive with high-yield savings accounts, money market accounts and certificates of deposit (CDs).
A money market fund is an investment — not a bank account — that owns short-term securities and debt sold by governments, municipalities and corporations.
Types of money market mutual funds
Money market mutual funds generally fit into one of three categories:
- Government money market funds: These funds hold a minimum of 99.5% of their portfolios in cash and/or government securities, namely US Treasury securities.
- Municipal money market funds: This type of money market mutual fund owns bonds issued by municipalities. Shareholders do not have to pay federal income tax on the distributions from these funds.
- Prime money market funds: Prime funds invest in corporate and bank debt.
Our list of the top money market mutual funds only contains government funds, with one fund also holding a concentration of municipal bonds. While all money market mutual funds are considered relatively safe, most investors consider government money market funds safest, particularly those that own government-backed Treasuries, which greatly reduce the chances of a default.
How to choose a money market mutual fund
To answer this question, CNN Underscored reached out to Corbin Grillo, a chartered financial analyst (CFA) and director of investment strategy with Linscomb Wealth.
Grillo cited the following factors to consider when choosing a money market fund.
Yield
As Grillo explained, this metric “can provide investors an expectation for a fund’s future return over the next year.” To illustrate, consider an example from our list of the best money market mutual funds for 2024.
The Vanguard Federal Money Market Fund (VMFXX) has a 7-day yield of 5.29%. Based on this number, if you invest $10,000 in VMFXX, you can expect to receive $529 in annual income from the fund.
Expense ratio
Expense ratios, noted Grillo, “reduce the net return to an investor, so it is generally advisable to search for lower-cost options.”
As an example, VMFXX’s expense ratio of 0.11% means you’ll pay $11 for every $10,000 you have invested in the fund. Taking a comprehensive view, this means that — all else equal — the net annual income you should expect to receive is $518, not $529, based on the above illustration.
Type of fund
For “the lowest-risk option,” Grillo said to go with government money market mutual funds because they’re supported by “government-backed securities.”
Grillo noted that, while prime money market mutual funds “still invest in very low-risk securities, they expand the universe beyond cash and securities backed by the government. Prime money market mutual funds can also purchase certificates of deposit, corporate-backed short-term debt and other private instruments.” By adding this layer of risk, Grillo said, “Prime money market mutual funds may have marginally higher yields than government money market mutual funds on average.”
Finally, Grillo recommended municipal money market mutual funds for “investors in high tax brackets” because they are exempt from federal income tax.
Minimum investment
Here’s an area where things get somewhat complicated, relative to the relatively straightforward world of money market mutual funds. And, really, this is a sometimes overlooked consideration with any type of investment.
A high minimum investment amount isn’t only a barrier to entry for small investors. It can lead to essentially underutilizing your available capital and sacrificing potential returns.
For example, let’s say you’re young with a long-term time horizon, and you have $10,000 to invest. Objectively speaking, it might not make a ton of sense to commit half of your capital to a money market mutual fund with a minimum investment requirement of $5,000. This would leave just $5,000 left over to invest in areas with more growth potential, such as growth stocks. A money market mutual fund with no or a lower minimum investment can be the better option for parking, for instance, emergency fund cash.
Of course, this is just a conventional example. Consider your specific situation before making any investment decisions. If you’re already well-diversified and on track for retirement in a portfolio of stocks and exchange-traded funds (ETFs), a larger cash position in a money market mutual fund can be a great way to enjoy the comfort of cash security. The same might apply for individuals who prefer to not invest their money in stocks or other comparatively risky assets.
Components to look for when choosing a money market mutual fund
The methodology we used to screen for the best money market funds of 2024 places emphasis on yield and expense ratio. If you’re looking to maximize income generation, start there.
- 7-day yield: You’ll usually see money market fund returns classified by their 7-day yield, which is the expected annual return based on the average income generated over the most recent 7-day period.
- Expense ratio: Yield is measured before factoring in the expense ratio, which measures the annual operating expense of a fund relative to its size. As with other investments, such as mutual funds and ETFs that own stocks, you should consider the return you anticipate from a money market fund against the cost of owning it.
- Taxable versus tax-exempt funds: Taxes can also play a role when choosing a money market mutual fund. Our list of the best-performing money market funds only contains taxable funds. Taxable money market funds tend to have higher yields than tax-exempt funds. Unless you’re in a high tax bracket, Vanguard recommends sticking with taxable funds because the tax savings you realize in a tax-exempt money market mutual fund tend not to offset the lower yield.
Money market funds versus money market accounts
A money market mutual fund is an investment product, whereas a money market account is a banking product, specifically a deposit account.
Like most checking and savings accounts, money market accounts at federally insured financial institutions receive Federal Deposit Insurance Corp. (FDIC) or National Credit Union Administration (NCUA) insurance. The FDIC does not insure money market funds. A different agency, the nonprofit Securities Investor Protection Corporation (SIPC), protects money market funds and other types of investments.
Money market accounts commonly include traditional banking features, such as check-writing, debit/ATM cards, electronic transfers and online bill pay. This is typically not the case with money market mutual funds.
How the current economic environment affects money market funds
With the onset of the current high-interest rate environment, money market mutual funds yields increased rapidly, making them the superior choice to big bank checking and savings accounts that continue to pay relatively low interest rates.
As the New York Federal Reserve Board explains, deposit rates at banks “tend to lag changes in the fed funds rate, particularly during a rising interest rate environment.” With the Federal Reserve reducing interest rates in September 2024 for the first time in years, and with additional cuts widely expected, the gap between the interest you earn in a money market mutual fund versus a bank could decrease.
“They move when the Fed moves,” said Peter Crane, founder of Crane Data, a publisher of money market mutual fund information. However, he said that while money market rates will come down a little on rate cuts, “It takes about 40 days to fully reflect” the size of whatever move the Fed makes.
Methodology
To find the best money market mutual funds, our team of experts used data, as of June 30, 2024, on the universe of money market funds provided by Crane Data. We screened out certain share classes, institutional funds, state-specific funds, funds with 7-day yields of less than 5%, those with expense ratios greater than 0.5%, share class net assets below $1 billion and investment minimums over $3,000, resulting in a list of 16 funds.
From this list, we rated funds according to the following criteria:
7-day SEC yield (30%)
Investors often consider money market funds for the income they provide, so we scored funds with the most robust 7-day yields higher.
Minimum investment (30%)
We scored funds with lower minimum initial investments higher. Lower minimums increase access to investors with smaller portfolios.
Expense ratio (20%)
Expense ratios can erode returns, so we scored funds with lower net expense ratios higher.
Share class net assets (10%)
We scored funds with a greater amount of assets under management higher, as this can be an indication of financial stability and investor trust.
AAA rating by Moody’s, S&P and/or Fitch (10%)
We scored funds with AAA ratings from at least one major ratings agency higher.
Frequently asked questions (FAQs)
This depends on your needs and objectives. If you require a suite of banking features, such as check-writing, direct deposit and a debit card, a savings account may be the better option. If you’re just looking for a place to park a significant amount of cash, a slightly higher interest rate in one of the best-performing money market mutual funds might be a better option.
First, debt instruments, such as bonds and the types of investments included in money market funds have a maturity date. At maturity, bond investors get paid the principal they invested plus interest.
Money market mutual funds own debt with low credit risk and short maturities. One reason why investors consider money market funds safe is because short maturities reduce interest rate risk. Due to tight regulation around money market funds, they can only invest in securities with maturities of 397 days or less. However, most debt held in government money market funds (the ones that populate our list of the best money market funds) have much shorter durations, typically of 60 days or less.
Not specifically. If you keep your money market mutual fund in an individual retirement account (IRA), you won’t have to pay taxes upon withdrawal. For how long depends on the type of IRA you use. With a traditional IRA, you’ll enjoy tax-deferred growth of your investment. With a Roth IRA, you can receive tax-free growth on your contributions and interest earned.
According to Grillo, “Money market mutual fund yields can change frequently because they are highly correlated with the prevailing level of short-term interest rates in the economy, which can fluctuate on a day-to-day basis. However, the magnitude of the change can vary significantly depending on the economic environment. For example, following the financial crisis, short-term interest rates remained low and stable for many years, so money market mutual fund yields didn’t change very much. More recently, short-term interest rates have increased significantly, meaning the yield on a typical fund today is much higher than it was just three years ago. It’s important for investors in money market mutual funds to understand that the yield they are receiving today may not be the yield they receive over the entire holding period. That yield can and will change depending on market conditions.”