Yoshiyoshi Hirokawa/Getty Pictures
With rates of interest remaining excessive, savers and traders are capable of earn first rate charges of return in comparatively secure investments comparable to cash market funds. Cash market funds put money into short-term securities issued by governments and companies and can be found from a number of completely different brokers and fund managers.
Buyers in cash market funds earn revenue, or a yield, from the securities which are held inside the fund.
Listed here are a few of the high cash market funds to think about on your portfolio.
Prime cash market funds
*Information listed under is as of April 28, 2025.
Vanguard Federal Cash Market Fund (VMFXX)
The Vanguard Federal Cash Market Fund invests in money and short-term securities issued by the U.S. authorities. The fund goals to supply present revenue whereas sustaining a excessive stage of liquidity.
- Yield: 4.22 p.c
- Expense ratio: 0.11 p.c
- Fund belongings: $352.0 billion
- Minimal preliminary funding: $3,000
Schwab Worth Benefit Cash Fund (SWVXX)
The Schwab Worth Benefit Cash Fund invests in short-term securities issued by U.S. and overseas entities. The securities could also be issued by governments, companies or monetary establishments. The fund goals to earn the best attainable present revenue whereas sustaining stability and excessive ranges of liquidity.
- Yield: 4.15 p.c
- Expense ratio: 0.34 p.c
- Fund belongings: $235.5 billion
- Minimal preliminary funding: None
JPMorgan Prime Cash Market Fund (VMVXX)
The JPMorgan Prime Cash Market Fund seeks to generate present revenue whereas offering a excessive stage of liquidity and a low volatility of principal. The fund invests in short-term securities that current minimal credit score threat comparable to U.S. authorities securities, floating-rate debt issued by U.S. and overseas companies and highly-rated industrial paper.
- Yield: 4.09 p.c
- Expense ratio: 0.48 p.c
- Fund belongings: $86.2 billion
- Minimal preliminary funding: $1,000
Invesco Authorities Cash Market Fund (INAXX)
The Invesco Authorities Cash Market Fund goals to supply a excessive stage of present revenue whereas sustaining stability and excessive liquidity. It invests basically all of its whole belongings in money, authorities securities and repurchase agreements backed by authorities securities.
- Yield: 4.10 p.c
- Expense ratio: 0.33 p.c
- Fund belongings: $6.2 billion
- Minimal preliminary funding: $1,000
Constancy Cash Market Fund (SPRXX)
The Constancy Cash Market Fund invests in short-term securities to provide a excessive stage of present revenue whereas sustaining stability and a excessive stage of liquidity. The securities bought could also be issued by home or overseas issuers. The fund additionally invests in repurchase agreements and the industrial paper of economic establishments.
- Yield: 4.01 p.c
- Expense ratio: 0.42 p.c
- Fund belongings: $127.6 billion
- Minimal preliminary funding: None
Vanguard Municipal Cash Market Fund (VMSXX)
The Vanguard Municipal Cash Market Fund goals to supply present revenue that’s exempt from federal revenue taxes whereas sustaining stability and a excessive stage of liquidity. As a result of the fund invests in municipal securities which are exempt from federal revenue tax, the yield is decrease than different cash market funds.
- Yield: 3.57 p.c
- Expense ratio: 0.11 p.c
- Fund belongings: $18.0 billion
- Minimal preliminary funding: $3,000
What’s a cash market mutual fund?
A cash market fund is a mutual fund that invests in short-term securities with little or no credit score threat. These securities could also be issued by governments, companies or monetary establishments that reside within the U.S. or overseas. Cash market funds are thought-about to be low-risk investments that provide present revenue primarily based on the prevailing stage of rates of interest.
Cash market funds intention to keep up a web asset worth, or NAV, of $1.00, whereas offering a excessive stage of present revenue. Different mutual funds, comparable to inventory funds, might intention to extend their NAV as their underlying investments carry out properly, however cash market funds search stability.
It’s straightforward to purchase and promote mutual funds, and this quick-start information exhibits the important thing issues you’ll want to know.
Cash market funds put money into short-term securities and provide traders extra return above what they’d earn by holding money. Buyers must be conscious that cash market charges can reply shortly to modifications in rates of interest.
— James Royal, Ph.D., Bankrate Investing and Wealth Administration Principal Author
Forms of cash market mutual funds
Cash market funds are usually divided into three classes: authorities, prime and municipal. Right here’s what you must learn about every sort.
- Authorities
Authorities funds put money into money, U.S. Treasury securities and repurchase agreements which are collateralized by U.S. Treasury securities.
- Prime
Prime, or normal goal, funds put money into authorities securities in addition to industrial paper, certificates of deposit, short-term securities issued by home and overseas companies and repurchase and reverse repurchase agreements.
- Municipal
Municipal or tax-exempt funds make investments the vast majority of their belongings in securities which are exempt from federal revenue tax.
Cash market funds vs. cash market accounts
You could have seen banks or credit score unions reference cash market accounts and puzzled if these are the identical factor as cash market funds. The reply isn’t any. A cash market fund is a mutual fund that invests in short-term securities whereas a cash market account is a product that banks or credit score unions provide to prospects that usually earns the next charge of curiosity than a typical financial savings account.
Maybe an important distinction between cash market funds and cash market accounts is that cash market funds will not be insured by the Federal Deposit Insurance coverage Company, or FDIC, whereas cash market accounts are FDIC-insured.
Cash market funds include very low threat, however there have been situations the place funds “broke the buck,” that means their NAV dropped under $1.00, comparable to throughout the 2008 monetary disaster. In these situations, the fund could also be liquidated and traders might obtain lower than $1.00 per share.
How to decide on a cash market mutual fund
Cash market funds are supplied by a variety of completely different monetary establishments comparable to banks, brokerage companies and mutual fund corporations. Listed here are a few of the key elements to think about when selecting a cash market fund:
- Yield: You’ll need to evaluate a fund’s yield to different funds within the business to be sure to’re getting the perfect return in your funding.
- Expense ratio: Funds cost an expense ratio, which comes instantly out of the return you in the end earn as an investor. All else being equal, the decrease the expense ratio, the higher it’s for traders.
- Sort of fund: Take into account whether or not you’d wish to put money into a authorities, prime or municipal cash market fund. Municipal cash market funds could also be notably interesting for these in excessive tax brackets.
- Different charges: Make sure you take note of any extra charges you could be charged when shopping for and promoting cash market funds. Some brokers might cost mutual fund commissions, whereas others might cost charges for funds from sure fund households.
Backside line
Cash market funds intention to put money into high-quality short-term securities that present a excessive stage of present revenue whereas sustaining liquidity and stability. The funds might put money into authorities securities in addition to securities issued by U.S. and overseas entities. Municipal cash market funds make investments primarily in tax-exempt securities.
Cash market funds is usually a good match for traders seeking to profit from the present rate of interest surroundings or saving for a short-term purpose. Remember that whereas the funds are thought-about low threat, they aren’t FDIC-insured.
Editorial Disclaimer: All traders are suggested to conduct their very own unbiased analysis into funding methods earlier than investing choice. As well as, traders are suggested that previous funding product efficiency isn’t any assure of future value appreciation.
