Best Money Market Mutual Funds

Best Money Market Mutual Funds

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In this article, our discussion will be on the best money market mutual funds of 2022.  Now, the money market may seem like a very new topic for those who do not have in-depth knowledge of the stock market.
Let us understand what the money market is with a short story and how it is different from our general share market –

Money market vs. Share market – Differences:

We all have heard the name of Warren Buffett, often remarked as the greatest investor of all time. When asked about the best process of making money from the stock market, he answered, ‘Patience is the key.‘ To make definite money from the stock market, not only are the selections of great companies enough but also, one must have to keep patience to succeed in the stock market.

But, as usual, we search for ways to get rich quickly. And that is probably the reason why some people do not like the money-making process of the stock market.

That is why there is something called MONEY MARKET – which is a bit different from the stock market, and as per our discussion, you probably have understood the prime difference between the stock market and the money market. The prime difference between the stock market and money market is on the basis of the timespan of investing your capital.

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The timespan of capital generation in share market & money market:

While the stock market is for long-term capital generation, the money market is oriented to generate capital in a shorter time span. The stock market deals in equity or direct shareholding of a company, whereas the money you keep in the money market is invested in debt.

Returns in stock market & money market:

Another key difference between the stock market & the money market is the percentage of returns. As the stock market deals with equity, the return you will get in the equity share market will undoubtedly be higher than the money market.

Risk factors in money market & share market:

However, when we talk about the risk involved in the share market & equity market, the scenario changes. It is known that the money you keep in the stock market is subject to market risk, but the money you invest in the money market involves significantly lesser risk as it deals in bonds and debts.
It is hoped that from these comparisons, the difference between the share market & money market is understood.

Now, it is time to compare various money market mutual funds available to invest in the USA.

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Vanguard Treasure Money Market Fund:

Vanguard Treasure Money Market Fund is our first pick on this list. The key reason behind our pick is the name associated with the fund. Vanguard is one of the leading investment companies across the globe. As of current data, about 8 trillion dollars is actively managed by Vanguard.

Vanguard Treasure Money Market Fund is an actively managed fund. It is also one of the safest funds out there because this fund invests most of its undermanaged assets in the United States Treasure securities,

The Vanguard Treasure Money Market Fund is primarily a debt fund, which is why 80% of the assets are invested in Government debts. This does not signify that it only invests its assets under the Government, but data from its official website support the aforesaid statistics. The fund’s expense ratio as of today is 0.09% & the minimum amount to invest in this fund is $3000.

Vanguard Treasure Money Market Fund – at a glance:

Asset management companyVanguard
Fund typeActively managed money market fund
Minimum amount of investment:$3000

Pros of Vanguard Treasure Money Market Fund:

  • Has beautifully outperformed the benchmark index
  • Managed by a trustworthy company
  • Very low expense ratio
  • Most of the managed assets are kept under government securities

Cons of Vanguard Treasure Money Market Fund:

  • The minimum investment amount is a bit high

American Century Capital Preservation Fund:

Our next choice is American Century Capital Preservation Fund. However, this fund is mainly for people who are short of money to invest in the aforesaid fund. The minimum amount required to invest in this fund is just $500.

Remember that this is applicable when you do a SIP in this fund. Only in the case of SIPs, the minimum amount to invest in this fund is $500. Otherwise, in a normal case (lumpsum investment), the minimum investment amount is $1000 (still way less than $3000 in the Vanguard fund). But the first thing that disappointed us about the fund was its returns over the years.

The fund has continuously failed to outperform the benchmark index (i.e., the Bloomberg Treasury bill index). This fund’s expense ratio is also comparatively very high – 0.48%.
One should invest in this fund if he/she is searching for a fund that pays dividends at regular intervals. It is one of those few funds which pays a 0.2% dividend on a monthly basis.

American Century Capital Preservation Fund – at a glance:

Asset management companyAmerican Century
Fund typeMoney market fund with a good dividend yield
Minimum amount of investment$2500
Expense Ratio0.48%

Pros of American Century Capital Preservation Fund:

  • Pays dividends at regular intervals
  • Minimum investment amount is not out of reach

Cons of American Century Capital Preservation Fund:

  • Has failed to outperform the benchmark index
  • Comparatively higher expense ratio

Vanguard Federal Money Market Fund:

Now let us get back another money market fund offered by Vanguard. This fund is named Vanguard federal Money Market Fund. From its name, it is clear that the fund assets most of its wealth in bonds offered by The Federal bank. Data tells that 99.5% of the money invested in this fund is invested in cash.

This fund also requires the same amount of money needed to make an investment in the Vanguard Treasure Money Market Fund – the amount is $3000. It keeps 23% of its invested amount in U.S. treasury bills.

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Vanguard Federal Money Market Fund – at a glance:

Asset management companyVanguard
Fund typeActively managed money market fund
Minimum amount of investment$3000
Expense Ratio0.11%

Pros of Vanguard Federal Money Market Fund:

  • Run by a popular asset management company
  • Low expense ratio
  • Keeps 99.5% of its assets under the U.S. government

Cons of Vanguard Federal Money Market Fund:

  • The required minimum amount if the investment is a bit higher than the above fund

Fidelity Investments Money Market Portfolio:

Fidelity Investments Money Market Portfolio fund is suitable for those people who have a huge amount of money but do not want to keep that money settled in their bank account for a long time. Instead, you can invest in the fund to earn minimal interest on your money.

The money you will keep in the fund will have high liquidity – just like any other money market fund. This ensures that you can withdraw your money at any time when you will need this.

Unlike the previous Vanguard funds, this fund does not allocate the lion’s share of its assets under bonds issued by banks/cash. It has a typical investment yield of about 25% of its assets which it invests in companies connected to financial services.
Surprisingly, the fund allocates just 2.4 % of its under-managed assets in U.S. Treasury debt.

Fidelity Investments Money Market Portfolio Fund – at a glance:

Asset management companyFidelity
Fund typeMoney market fund
Minimum amount of investment$1000000
Expense Ratio0.21%

Pros of Fidelity Investments Money Market Portfolio Fund:

  • The fund invests its under-managed assets in financial-service-providing companies
  • Creates a well-diversified portfolio

Cons of Fidelity Investments Money Market Portfolio Fund:

  • The minimum amount required for investment is huge – unsuitable for most single individuals.
  • The expense ratio is slightly high

Pimco Government Money Market Fund:

If you have the required money to invest in the aforementioned fund but are not willing to invest in it simply because it has a higher expense ratio – there is a better deal for you – Pimco Government Money Market Fund. Pimco Government Money Market Fund is another good idea to invest in as it tries to act as a fixed income source.

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According to their documents, this fund invests in high-quality treasury & other money market instruments. This fund assures that their undermanaged assets are invested only in government securities.

Pimco Government Money Market Fund – at a glance:

Asset management companyPimco
Fund typeMoney market fund providing fixed income
Minimum amount of investment$1000000
Expense Ratio0.14%

Pros of Pimco Government Money Market Fund:

  • Tries to generate fixed income
  • Allocate most of its money under U.S. treasury bills, most of which are secured by the U.S. government
  • Has a lower expense ratio than the previous fund

Cons of Pimco Government Money Market Fund:

  • Like the previous fund, this one also has the same minimum investment amount – 100000
  • Total asset under management is lower than other funds

Federated Hermes Prime Cash Obligations Fund:

The last point we are talking about requires half of the minimum investment amount required for the above two funds. It has a wide amount of diversification in its portfolio. The Federated Hermes Prime Cash Obligations Fund mostly invests its assets under securities offered by banks, corporate companies & the U.S. government. The fund is managed by fund managers having lots of experience.

Fidelity Investments Money Market Portfolio Fund – at a glance:

Asset management companyFederated Hermes
Fund typeActively managed money market fund
Minimum amount of investment$500000
Expense Ratio0.20%

Pros of Vanguard Treasure Money Market Fund:

  • Has a wide range of investment instruments
  • Actively managed fund with fund managers having good past experience
  • Invests in securities issued by banks also

Cons of Vanguard Treasure Money Market Fund:

  • The minimum investment amount is not high as the past two funds – but still slightly higher than a normal salaried individual
  • The expense ratio could be a bit less

Things you should take care of before investing in a money market fund:

Remember that, though money market funds provide you with the facility of liquidity, if you are expecting higher returns on your invested capital – you should not invest that capital in a money market fund.

Most money market funds declare a fixed income by their funds. But there are steal some funds which do not take the responsibility of delivering a fixed income on your capital – while investing in any money market fund, and you should obviously take care of that.

Another thing you need to take care of is that many money market funds have a minimum investment amount beyond our reach – it is better not to go for these funds unless you really have that amount to invest.

Conclusion

So this was the article in which we discussed some quality money market funds. If there are some queries left behind which have been unanswered in this article, feel free to ask us your questions in the comments.

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I am a well-skilled experience Stock Marketer and Investor. I have good knowledge of the stock market and investment. I have completed Bachelors in Finance And Investment from the University of Virginia (US).
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