The 7 best money market mutual funds in April 2024
Published 6:00 AM EDT, Mon March 18, 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 seven 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 seven best funds.
Vanguard Federal Money Market Fund
The second-largest fund on our list with $283.4 billion in assets, the Vanguard Federal Money Market Fund (VMFXX) has the third-lowest expense ratio, after its Vanguard counterparts.
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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 21 days.
- Large fund with net assets at $283.4 billion
- Very high yield
- Very low expense ratio
- Relatively high minimum investment
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
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.
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This fund has a weighted average maturity of 35 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.
- Large fund with share class net assets at $168.1 billion
- No minimum investment requirement
- Relatively high expense ratio
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.
PIMCO Government Money Market Fund Class A
The PIMCO Government Money Market Fund Class A (AMAXX) is the smallest fund on our list of the top seven money market mutual funds for 2024, with share class net assets of $1.3 billion. What it lacks in size, it makes up for with its competitive 5.27% yield, low expense ratio and a $1,000 minimum initial investment, placing it in between Schwab and Fidelity on the low end and Vanguard on the high end of this criterion.
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The fund invests exclusively in government-backed obligations, such as Treasury bills, and repurchase agreements. Its weighted average maturity does not exceed 60 days.
- Yield competitive with money market funds and other short-term investments
- Relatively low expense ratio
- Relatively low share class net assets
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.
Vanguard Cash Reserves Federal Money Market Fund Admiral Shares
Tied 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.”
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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 22 days.
- Tied for highest yield on our list
- Very low expense ratio
- Relatively high minimum investment
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
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%.
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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 43 days.
- Tied for highest yield on our list
- Lowest expense ratio on our list
- Relatively high minimum investment
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.
Fidelity Government Money Market Fund
The largest fund on our list, with share class net assets of $285.1 billion, the Fidelity Government Money Market Fund (SPAXX) has a low barrier to entry and competitive yield but is held back by its relatively high expense ratio. At 0.42%, you’ll pay $4.20 for every $1,000 invested in the fund, compared to just $0.90 per $1,000 in the Vanguard Treasury Money Market Fund.
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The average weighted maturity of the fund is 34 days. It invests 99.5% of its assets in cash, government securities and government-backed repurchase agreements.
- Largest fund on our list
- No minimum investment requirement
- Relatively high expense ratio
Per Fidelity, this fund is meant for “investors seeking as high a level of current income as is consistent with the preservation of capital and liquidity.”
Fidelity Government Cash Reserves Money Fund
Near identical on the measures we used to rank the top money market mutual funds for 2024, the Fidelity Government Cash Reserves Money Fund (FDRXX) differs from the closely named Government Money Market Fund in only two significant ways. Cash Reserves is the older version of the Government Money Market Fund and is available as a core position in Fidelity retirement accounts.
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Cash Reserves also invests 99.5% of its assets in cash, government securities and repurchase agreements. As Fidelity notes regardig both funds, “Certain issuers of U.S. Government securities are sponsored or chartered by Congress but their securities are neither issued nor guaranteed by the US Treasury.”
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The fund has an average weighted maturity of 35 days.
- Third-largest assets on our list
- No minimum investment requirement
- Relatively high expense ratio
Like Fidelity’s Government Money Market Fund, this fund is appropriate for investors seeking a high current income and preservation of capital and liquidity. But unlike SPAXX, FDRXX can only be used as a core position in Fidelity’s retirement accounts.
Our picks at a glance
| Rank | Fund | Yield | Net expense ratio | Minimum investment |
|---|---|---|---|---|
| 1 | Vanguard Federal Money Market Fund (VMFXX)
| 5.31%
| 0.11%
| $3,000
|
| 2 | Schwab Value Advantage Money Fund Investor Shares (SWVXX)
| 5.28%
| 0.34%
| $0
|
| 3 | PIMCO Government Money Market Fund (AMAXX)
| 5.27%
| 0.18%
| $1,000
|
| 4 | Vanguard Cash Reserves Federal Money Market Fund Admiral Shares (VMRXX)
| 5.32%
| 0.10%
| $3,000
|
| 5 | Vanguard Treasury Money Market Fund (VUSXX)
| 5.32%
| 0.09%
| $3,000
|
| 6 | Fidelity Government Money Market Fund (SPAXX)
| 5.01%
| 0.42%
| $0
|
| 7 | Fidelity Government Cash Reserves (FDRXX)
| 5.03%
| 0.40%
| $0
|
Why consider a money market fund?
- Income: For a competitive interest rate on your savings.
- Liquidity: Most money market markets 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.
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 fund
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.
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.
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. 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.
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 receive Federal Deposit Insurance Corp. (FDIC) insurance. The FDIC does not insure money market funds. A different agency, the nonprofit Securities Investor Protection Corporation (SIPC), provides protection for 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.” As long as the Fed holds rates steady, expect money market mutual funds to continue to be a potentially attractive option for your cash. However, if the Fed starts cutting rates later this year or in 2025, the gap between the interest you earn in a money market mutual fund versus a bank could decrease.
Crane Data founder Peter Crane told us to expect money market rates to hover around 5% for “a little while longer,” noting that “they move when the Fed moves.” However, Crane 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 year-end 2023 data 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 21 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.
Expense ratio (20%)
Expense ratios can erode returns, so we scored funds with lower net expense ratios higher.
Share class net assets (20%)
We scored funds with a greater amount of assets under management higher, as this can be an indication of financial stability and investor trust.
Minimum investment (20%)
We scored funds with lower minimum initial investments higher. Lower minimums increase access to investors with smaller portfolios.
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.
Our list of the best money market mutual funds does a lot of the legwork for you. Treat money market mutual funds like any other investment. Do your own due diligence. Check with your financial advisor to ensure they make sense as part of your overall money management strategy. Focus on the relationship between yield and expense ratio, two factors we favored heavily in our rankings, alongside agency ratings, minimum initial investment and fund size.
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.
Editorial Disclaimer: Opinions expressed here are the author's alone, not those of any bank, credit card issuer, airlines, hotel chain, or other commercial entity and have not been reviewed, approved or otherwise endorsed by any of such entities.
This content is for educational purposes only and is not intended and should not be understood to constitute financial, investment, insurance or legal advice. All individuals are encouraged to seek advice from a qualified financial professional before making any financial, insurance or investment decisions.
Note: While the offers mentioned above are accurate at the time of publication, they're subject to change at any time and may have changed or may no longer be available.
