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The Best Money Market Mutual Funds for Yield Investors

 
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Learn how to choose the best money market mutual funds for high yields.

description: an anonymous investor sits at their desk, looking at a computer screen with charts and graphs. they appear to be deep in thought, considering their options for investing in money market mutual funds.

Investors looking to park their cash in a low-risk, high-yield investment vehicle often turn to money market mutual funds. These funds invest in short-term debt securities and offer higher yields than traditional savings accounts or CDs.

But with so many money market mutual funds on the market, how do you choose the best one? Here are some factors to consider:

  1. Yield: Of course, the yield is one of the most important factors to consider when choosing a money market mutual fund. Look for funds with yields that are higher than the national average.

  • Expense Ratio: Money market mutual funds charge expenses to cover their operating costs. Look for funds with low expense ratios to maximize your returns.

  • risk: While money market mutual funds are generally considered low-risk investments, some funds may invest in risk securities than others. Look for funds with a high credit rating to minimize your risk.

  • Liquidity: Money market mutual funds should be highly liquid, allowing you to easily access your funds when you need them.

  • Fund Manager: Consider the experience and expertise of the fund manager when choosing a money market mutual fund.

  • It's important to note that money market mutual fund yields are not guaranteed and can fluctuate based on market conditions.

    With 'cash sweeps,' brokerage firms automatically put uninvested client assets into a low-yielding bank-deposit program. This may be convenient for some investors, but it's important to compare the yield of these programs to the yield of money market mutual funds before making a decision.

    Investors often park cash in money-market funds after year-end tax-loss harvesting or portfolio rebalancing. But the current rush of inflows has caused some funds to close to new investors or impose fees on large deposits.

    When choosing a money market mutual fund, consider the options offered by Charles Schwab. Our list of best Charles Schwab funds showcases diversity and low fees. However, it's important to note that Schwab's yields may not be as high as other options on the market.

    With today's much higher treasury yields and Fed's forward guidance, SCHD's yield is no longer competitive with treasuries. This means that investors may need to look at other options for high yields.

    Charles Schwab became a major player by offering discounted stock trades back when high commissions were the norm. These days, nearly every brokerage firm offers low-cost trades, but Schwab remains a popular choice for its wide range of investment options.

    Inflation is stubbornly high and interest rates on savings accounts aren't anywhere close to keeping pace. While the yield on a two-year CD may be higher than that of a money market mutual fund, the longer-term commitment may not be suitable for all investors.

    Many investors find it necessary to maintain a lower-beta allocation in their portfolio. Money market mutual funds can provide a low-risk option for these investors.

    But for yield investors: Short-term Treasury yields near 4%. Six-month CD yields at 3.5%, if you shop around. By Wolf Richter for WOLF...

    Labels:
    money market mutual fundsyieldexpense ratioriskliquidityfund managercharles schwabtreasury yieldsinflationbeta allocation

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