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What are money market funds?

21.01.2020

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The interest rate policy of the Federal Reserve the Fed is a key driver for money market rates. The rules that govern money market mutual funds permit the funds to buy only securities that mature in days or less. Treasury bills, certain other U. The remaining investments can be in longer-term issues, provided the overall weighted average maturity of the fund is 60 days or less.

The U. Money market mutual funds, like bond and stock mutual funds, are investments, and, as such, are not guaranteed. It is important that investors understand that. Our tools make it easy for you to filter, sort, and compare funds until you find exactly what you are looking for. Fidelity's money market funds invest in money market securities of the highest quality and provide clients daily liquidity. Past performance is no guarantee of future results.

Current and future portfolio holdings are subject to risk. Votes are submitted voluntarily by individuals and reflect their own opinion of the article's helpfulness. A percentage value for helpfulness will display once a sufficient number of votes have been submitted. Skip to Main Content. Search fidelity. Investment Products. Why Fidelity. Print Email Email. Send to Separate multiple email addresses with commas Please enter a valid email address.

Your email address Please enter a valid email address. Message Optional. Next steps to consider Open an account. Use our Mutual Fund Evaluator. How Fidelity manages money market funds. Please enter a valid e-mail address.

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It is a violation of law in some jurisdictions to falsely identify yourself in an e-mail. All information you provide will be used by Fidelity solely for the purpose of sending the e-mail on your behalf. The subject line of the e-mail you send will be "Fidelity. Your e-mail has been sent. Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information.

Read it carefully. You could lose money by investing in a money market fund. If you are looking to earn more from your cash holdings, money market mutual funds might be the perfect place to invest your cash. The lesser known money market mutual fund which is not FDIC insured more than holds its own when it comes to a safe place to hold your money, while earning interest. Money market funds were developed in the s before bank money market accounts were allowed. A money market fund is typically invested in short-term high-quality debt products, making it less risky than a mutual fund invested in stocks or longer term bonds.

Money market funds can be categorized into three groups: Prime, Government and Tax-free. Prime money market funds are typically invested in short-term corporate and bank debt securities. Government money market funds have at least Finally, tax-free money market funds are invested primarily in debt obligations issued by municipalities or other entities whose interest is federally tax-exempt.

Money market funds can be effective additions to investment portfolios in need of high liquidity with a low tolerance for losses. Liquidity simply refers to how easy it is to convert the investment into cash. For example, an investment property has much less liquidity than a savings account, since it would likely require at least a couple of months to sell the property and get the cash. A savings account on the other hand is highly liquid, since a quick trip to the bank is all you need to retrieve your cash.

You must typically hold a CD until its full maturity date to avoid paying an early withdrawal penalty. Treasury bills also have specific maturity dates. The largest difference lies in the ability for yields on money market mutual funds to rise proportionately with interest rates. This makes money market mutual funds a good place to hold cash and earn some interest.

One example might be when you have saved up a down payment for your first home and are simply waiting to find the perfect house. The stock market might be too risky since you want to buy the house soon and market volatility could eat up some of your investment. The best money market funds will offer a combination of low risk, high yields, and low expenses. To make my selection, I combed through the list of money market mutual funds at MutualFunds.

I came up with a short list of 15 different money market mutual funds, which you can see in the table below sorted by their 7-Day yield. Remember that when it comes to any kind of investment, past performance is NOT an indicator for future performance.

When comparing money market mutual funds a few patterns arose.

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