Money market funds invest in short-term, high-quality debt to preserve capital and provide liquidity. They are not FDIC-insured (unlike bank money market deposit accounts), and yield levels track short-term interest rates. Types include Treasury/government, prime, and municipal funds; choose by risk profile and tax considerations. Fees and inflation risk can affect returns, so compare funds before investing.

What money market funds are

Money market funds are pooled investments that buy short-term, high-quality debt - Treasury bills, repurchase agreements, commercial paper and similar instruments. They aim to preserve capital, provide liquidity, and deliver modest yield. Because they invest in short maturities, they generally experience far smaller price swings than longer-term bond funds.

How they differ from bank products

Money market mutual funds are not the same as bank money market accounts. Mutual funds are investment products regulated by the SEC and are not FDIC-insured. Banks offer money market deposit accounts (MMDAs) and savings that are FDIC-insured up to applicable limits but may have different features, minimums, and rates.

NAV, liquidity and recent rule changes

Many retail and government money market funds continue to maintain a stable $1 Net Asset Value (NAV) per share to keep withdrawals simple. Some institutional prime funds now operate with a floating NAV following post-crisis regulatory reforms, which affects how their shares are priced and redeemed.

All money market funds emphasize liquidity: you can usually redeem shares same day, and many offer check-writing, debit access, or automatic sweep features for brokerage accounts.

Yields and interest-rate sensitivity

Money market yields track short-term interest rates. When central banks raise policy rates, money market yields tend to rise; when policy eases, yields fall. Over the past few years yields for many money market funds increased from the historically low levels of the 2010s and became a meaningful cash-management option for investors.

Keep in mind that yields vary by fund type: government and Treasury money market funds typically offer lower credit risk, while prime funds can offer higher yields in exchange for exposure to short-term corporate paper. Municipal (tax-exempt) money market funds are available for investors seeking federally tax-advantaged income.

Risks, fees and where they fit in a portfolio

Money market funds aim to preserve capital but are not bank deposits and are not insured. Investors face inflation risk (purchasing power can erode if yields lag inflation) and, depending on the fund, modest credit or liquidity risk.

Expense ratios and fees will reduce returns, so compare them when choosing a fund. For short-term cash, emergency savings, or a temporary holding place during portfolio rebalancing, money market funds work well because they combine liquidity with professional management.

Practical tips

  • Match fund type to purpose: Treasury/government funds for maximum credit safety, prime funds for slightly higher yield, municipal funds for tax-sensitive accounts.
  • Check fees, liquidity features, and any minimums before investing.
  • Remember money market funds are a conservative cash-management tool, not a guaranteed savings vehicle.
Money market funds are a pragmatic, low-volatility option for parking cash. They won't beat long-term growth investments, but their liquidity and capital-preservation focus make them a useful part of a diversified portfolio.

FAQs about Money Market Fund Yields

Are money market funds safe?
Money market funds are relatively low risk because they invest in short-term, high-quality debt, but they are not FDIC-insured. They can still carry inflation, credit, or liquidity risk depending on the fund type.
How do money market funds differ from bank money market accounts?
Money market mutual funds are investment products regulated by the SEC and are not FDIC-insured. Bank money market deposit accounts are bank products insured by the FDIC up to coverage limits. They may offer different access features and rates.
Why did money market fund NAV rules change?
Regulatory reforms after the financial crisis introduced changes to how certain institutional prime funds price shares, including floating NAVs for some funds, to reduce systemic risk and change redemption mechanics.
Which type of money market fund should I choose?
Use Treasury/government funds for maximum credit safety, prime funds for potentially higher yields with some credit exposure, and municipal money market funds if you want federally tax-exempt income.
Can I use money market funds for emergency savings?
Yes. Their liquidity and capital-preservation focus make them suitable for emergency funds or temporary cash holdings, but remember they are not insured and returns can lag inflation.

News about Money Market Fund Yields

Bond Boss: are money market funds still a good deal? - Interactive Investor [Visit Site | Read More]

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5 Best Money Market Mutual Funds Of 2025 - Forbes [Visit Site | Read More]

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