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Money market funds are a type of mutual funds that yield fixed income from investments in high-quality short-term debt. The stock market can be volatile and unpredictable at times making investing in a risky venture. However, money market funds are among the safer investments you can make to secure your financial future.
Money market funds offer a low risk and low yield portfolio that makes it a popular choice for investment in cash equivalent assets. The investments are not an alternative to employer-sponsored savings and retirement plans. Instead, investing in some of the best money market funds can yield additional income to supplement your retirement savings.
Let us understand a few pros and cons of investing in some of the best money market funds.
Pros
- These funds are a safe investment with low risk and steady returns
- Money market funds invest in securities and assets that have high liquidity
Cons
- Inflation can harm the purchasing power of a potential investor owing to a low yield
- The annual fees and other expenses can cut into your profit margin significantly
- Even some of the best money market funds are not insured by the government
- Alternatives in stock and securities will always have a higher rate of return in comparison
The profits from even the best money market funds accounts may not be significant. However, you can consider the following options in case you are looking for a safe and steady return on your investment.
Here is a list of some of the best money market funds and investment companies
Vanguard
Invest in low-cost money market funds with Vanguard. The company offers money market mutual funds that protect your cash from market risk. You enjoy a steady flow of income that can be further utilized for reinvesting into stocks and bonds. The account also allows easy access to cash and lets you transfer money from your bank account to your portfolio. Vanguard offers both taxable and tax-exempt options for some of the best money market mutual funds. You have the liberty to create your own portfolio in the Federal, Prime, and Treasury money market. Tax-exempt markets include the California Municipal, New Jersey Municipal, New York Municipal, and Pennsylvania Municipal. All markets favor an expense ratio in the range of 0.09% to 0.16% accordingly.
Charles Schwab
One of the well-known investment management companies in the market, Charles Schwab offers some of the best money market funds in the government, prime, and municipal sectors. There are many perks of investing with Charles Schwab as the fund provides stability of capital, better liquidity, and income avenues for your investment. Securities in the prime market for invest mainly include those issued by the U.S and foreign corporations, financial institutions, and the government. Government and Treasury options include investments in short-term government debt securities. The municipal money market fund includes options for investing in short-term municipal securities issued by the state, government, and municipal agencies.
American Century
The investment management company offers five popular prospects for investment. Popular low-risk short-term funds include the California Tax-free Money Market Fund, Capital Preservation fund, Prime Money Market Fund, Tax-Free Money Market Fund, and U.S. Government Money Market Fund. The yield on the money market funds ranges from 0.61% to 1.66% on an average. The yield is the estimated income over a period of 7 days and 30 days alternatively. Note that the return on investment and the value will fluctuate periodically. American Century will consolidate your total investment to provide the best possible yield over a favorable income to expense ratio.
It is advisable to find investment agencies and companies that are insured by the FDIC to safeguard your investment. No matter how secure your mutual fund portfolio is, you must be prepared to handle a potential loss due to fluctuations in market rates.
You can always contact a financial advisor or consult with the customer executives at the company to find which mutual fund serves your purpose for investing in the short term.
