The Top 40 Low Cost Best US Money Market Funds
You can save by investing in one of the top 40 low cost best money market funds
This article discusses the top 40 low cost best money market mutual funds for your savings investments — either directly with the mutual fund company or through retirement investment programs that include this money market savings fund as an option. Therefore, you might be eligible to invest in some of the institutional mutual money funds on this list, but not in others.
Note that this article used to list the top 25 low cost best money market funds, but it was expanded to the top 40. When expanded to 40, it was also separated into two parts: A) national money market funds and B) state money market funds.
However, there are many funds on the list that allow direct deposits by individual investors. Anyone can invest in money market savings accounts offered by fund companies that deal directly with the public. In this article, we also consider money funds with a wide range of initial deposit balance requirements. Minimum money market deposit account requirements are listed in the table below.
The primary objective of this article is to identify the best money market accounts — from the standpoint of low investment management fees. When you review the money funds list below, you will immediately notice that just a handful of mutual fund companies account for these 40 money market savings fund offerings. These companies are American Century, Charles Schwab, Fidelity Investments, T Rowe Price, and Vanguard. At the bottom of this article, you will also find links to the home webpages of these money fund companies.
Fidelity and Vanguard have the most low cost money market funds on this list
Perhaps, most notable on the list are Fidelity Investments and The Vanguard Group, because of their multiple low cost account offerings and the large dollar amount of money market fund assets that they have under management. Vanguard’s long term business strategy has been to offer the best mutual funds at the lowest costs. In many investment asset classes, Vanguard simply dominates the low cost mutual funds marketplace for direct purchase accounts with both low and high minimum deposits. In the last few years in particular, Fidelity also has begun to compete with Vanguard by offering a wider range of low cost mutual funds, including fund offerings with attractive money market account rates.
Note that when you screen investment funds in almost any investment asset category and rank them from lower to greater investment management ratios, the resulting investment fund lists tend to be populated by funds from only a handful of investment management companies. A mutual fund company sets its business strategy, and some of them have decided to compete on the basis of low costs and efficiency. These low cost investment fund companies tend to do a better job of serving the interests of individual investors.
The sad fact is that there simply are too few of these firms that are trying to save you money on your investments. Most investment fund companies seem to have a business strategy that is quite the opposite. You are their cow to milk. Their marketing materials selectively focus on the past performance of their successful funds, while sweeping their dogs under the carpet. They charge you high costs, which doom most of these expensive funds to be inferior performers in the future. (See: Pay Less to Get More.)
What is important, when you buy money market saving funds?
Investment research overwhelmingly shows that lower cost mutual funds tend to yield higher returns. In general, the higher the mutual fund company expenses, the lower the net returns to individual investors. In the highly competitive money securities market place, more expensive professional mutual funds money managers do not achieve high enough returns to cover their higher fees. As a result, these higher costs cause you to get inferior net returns. You pay more. You get less.
For example, read this article to understand why paying higher bond mutual fund fees will most often create a “deadweight” loss for you: Bond Mutual Fund Fees. This article about the high investment management costs of bond mutual funds summarizes three studies. All three of these cost evaluation studies clearly show that the more you pay for bond funds, the less you tend to get. What is true with bond mutual funds is also true with money market savings accounts.
[Incidentally, if you are interested in the best low cost bond mutual funds, see these articles on our sister blog, Bond Market Index Fund: The Top 14 Low Cost United States Bond Mutual Funds (Low Minimum Deposit) and Top 11 Low Cost US Taxable Fixed Income Mutual Funds (High Minimum Deposit).]
Regarding choosing money market mutual funds, the process of picking them can be even more straightforward than choosing bond funds. Bonds have a great deal more pricing complexity than money funds do. However, as with everything else in finance and investing, things seem to become much more complex very rapidly once you take off the lid and look inside.
First, there are no government guarantees or otherwise that protect your assets in money market mutual funds. With money market savings accounts, you could lose your money. If for some reason, the market value of the securities in the fund portfolio fall significantly, then the net asset value (NAV) could fall below $1.00. This is known as “breaking the buck,” and it happens more often than most individual investors realize.
High cost and high yield money market mutual funds must also be higher risk money funds
Individual investors are always looking for the highest returns, but often they do not ask about the risks associated with seeking higher returns. Since money market funds compete for the same customers, they want to offer the highest money market account rates. How can high cost funds offer the best money market fund rates?
Well, if you assume for a moment that all money market funds have that same management expense ratios, then obviously some funds could only offer higher interest rates, if they invested in investment instruments with higher yields. Of course, no investment with a higher yield comes without higher assuming higher risk, as well. High return and low risk investments are just a fantasy for naive investors. Therefore, if money funds offer higher yields, they can only achieve these higher yields by investing in more risky assets.
Now, let’s assume that we are back in the real world and that some funds (many funds) also charge higher management expense ratios than others — sometimes dramatically higher expense ratios. If these more expensive money market funds still want to compete for customers on interest rate yields, then they have to invest in even more risky securities to achieve much higher returns. These supposedly higher gross returns from more risky securities are then reduced by their much higher management expenses.
For an extended period, high cost and high yield money market mutual funds might do just fine. Nevertheless, the higher risk is still there, because the underlying risk of the money market investment securities is still there. The risks are just not obvious to most investors. The question is when and how will this higher risk manifest itself?
Therefore, one of the major reasons that you should first screen money market mutual funds to pick only those with the lowest expenses is that lower cost funds do not have to take on so much risk to deliver higher returns. Professionally managed funds with lower costs should have a better risk and return profile over the long term.
However, to the extent that you choose only from among the low cost leaders, and you still pick those with higher money market account rates, you need to realize that you are still taking more investment risk. Nevertheless, you almost certainly are not taking as much risk as you would, if you picked a money market savings fund with both high yields and high costs.
Breaking the buck – money market account risk and mutual fund company reputation.
You might wonder how often a money fund has broken the buck. The only instance we found was from 1994, when the U.S. Government Money Market Fund of Denver, Colorado invested in derivative securities and broke the buck. The fund was liquidated and investors were quite lucky and got back about $.96 on the dollar.
Nevertheless, there have been dozens of times when money funds broke the buck, but were bailed out by their parent mutual fund company. Within the year after the onset of the credit crunch in mid-2007, as the US housing bubble began to collapse, there were at least a dozen of these money fund “break the buck” rescues by their parent companies.
Why does the parent of the mutual fund company, step in? Generally, it is because they want to prevent a run on the bank — their mutual fund “bank.” They know that investors perceive that the net asset value is supposed to be stable and always equal to one dollar. Despite all their disclosures and small print, mutual fund companies realize that their money market savings fund investors expect money market account rates to be higher than a savings account, while they still believe that a dollar is a dollar and that the NAV will always be a buck. Most money fund investors probably assume that regular depository bank savings account interest rates are just lower due to higher fees and higher bank costs and not due to higher investment risk.
If the buck were broken and the money market account NAV fell below a buck, investors would panic and liquidate en masse. As investors fled the money market fund, many would also begin to question the fund company’s overall investment management capabilities. Many would also liquidate their other bond and stock mutual fund investments with that firm. If the mutual fund company did not support the NAV at $1.00, then their entire business could fall.
In summary, a good way to select the best money market funds with a reasonable risk and return profile is to choose from the lowest cost vendors. Then, you hope that they will be competent and not take unwarranted risks in pursuit of higher returns. Next, you hope is that if the fund’s money managers do made some securities investments that turn sour, then the parent company would have enough capital and would step in to bail out the fund, not break the buck, and prevent a customer run on their entire financial product portfolio.
Our list of the top 40 low cost best money market funds
The table of low cost money market funds below is ordered by increasing annual management expense ratio. However, all these money funds have management expense ratios that are very low. Some of these money market funds are institutional funds, where you might expect the management expense ratio to be very low due competition among vendors to be included in the institutional money market fund. However, sadly this is often not the case, because there are numerous institutional investment plans that offer money funds with higher fees. (They are not on this list, of course).
Perhaps even more interesting are the funds on the list below that you, as an individual investor, can purchase directly from the mutual fund company. Also, note that this list contains a mixture of taxable and non-taxable money market funds. Therefore, realize that comparing the listed money market yields would be an apples to oranges comparison, due to differences in taxability of the interest income.
Look below this list of the top 40 low cost best money market funds to find links to the websites of these companies. Also, see the notes at the bottom of this table.*
National Money Market Funds
#1) American Century Capital Preservation Fund — CPFXX
Annual Money Funds Management Expense Ratio ____0.06%
Minimum Money Market Account Investment _______$25,000
#2) Fidelity US Treasury Money Market Fund — FDLXX
Annual Money Funds Management Expense Ratio ____0.06%
Minimum Money Market Account Investment _______$3,000
#3) Vanguard Treasury Money Market Fund Admiral — VUSXX
Annual Money Funds Management Expense Ratio ____0.08%
Minimum Money Market Account Investment _______$50,000
#4) Fidelity Government Money Market Fund — SPAXX
Annual Money Funds Management Expense Ratio ____0.11%
Minimum Money Market Account Investment _______$25,000
#5) T Rowe Price Tax-Exempt Money Market Fund — PTEXX
Annual Money Funds Management Expense Ratio ____0.12%
Minimum Money Market Account Investment _______$2,500
#6) Vanguard Federal Money Market Fund — VMFXX
Annual Money Funds Management Expense Ratio ____0.13%
Minimum Money Market Account Investment _______$3,000
#7) Vanguard Tax-Exempt Money Market Fund Investor — VMSXX
Annual Money Funds Management Expense Ratio ____0.13%
Minimum Money Market Account Investment _______$3,000
#8) Fidelity US Government Reserves — FGRXX
Annual Money Funds Management Expense Ratio ____0.14%
Minimum Money Market Account Investment _______$2,500
#9) T Rowe Price US Treasury Money Market Fund — PRTXX
Annual Money Funds Management Expense Ratio ____0.14%
Minimum Money Market Account Investment _______$2,500
#10) Fidelity AMT Tax-Free Money Market Fund — FIMXX
Annual Money Funds Management Expense Ratio ____0.15%
Minimum Money Market Account Investment _______$25,000
#11) Fidelity Municipal Money Market Fund — FTEXX
Annual Money Funds Management Expense Ratio ____0.15%
Minimum Money Market Account Investment _______$5,000
#12) T Rowe Price Summit Muni Money Market Fund — TRSXX
Annual Money Funds Management Expense Ratio ____0.15%
Minimum Money Market Account Investment _______$25,000
#13) Vanguard Prime Money Market Fund Investor — VMMXX
Annual Money Funds Management Expense Ratio ____0.16%
Minimum Money Market Account Investment _______$3,000
#14) Fidelity Money Market Fund Trust Retirement Government — FGMXX
Annual Money Funds Management Expense Ratio ____0.17%
Minimum Money Market Account Investment _______$100,000
#15) Schwab Retirement Advantage Money Market Fund — SWIXX
Annual Money Funds Management Expense Ratio ____0.24%
Minimum Money Market Account Investment _______$25,000
#16) Fidelity Money Market Fund — SPRXX
Annual Money Funds Management Expense Ratio ____0.25%
Minimum Money Market Account Investment _______$25,000
#17) Fidelity Select Money Market Fund — FSLXX
Annual Money Funds Management Expense Ratio ____0.26%
Minimum Money Market Account Investment _______$2,500
#18) Fidelity Cash Reserves — FDRXX
Annual Money Funds Management Expense Ratio ____0.28%
Minimum Money Market Account Investment _______$2,500
State Money Market Funds
#19) Fidelity Arizona Municipal Money Market Fund — FSAXX
Annual Money Funds Management Expense Ratio ____0.09%
Minimum Money Market Account Investment _______$5,000
#20) Fidelity Massachusetts Municipal Money Market Fund — FDMXX
Annual Money Funds Management Expense Ratio ____0.10%
Minimum Money Market Account Investment _______$5,000
#21) Fidelity Massachusetts AMT Tax-Free Money Market Fund — FMSXX
Annual Money Funds Management Expense Ratio ____0.10%
Minimum Money Market Account Investment _______$25,000
#22) Vanguard Pennsylvania Tax-Exempt Money Market Fund — VPTXX
Annual Money Funds Management Expense Ratio ____0.10%
Minimum Money Market Account Investment _______$3,000
#23) Vanguard California Tax-Exempt Money Market Fund Investor — VCTXX
Annual Money Funds Management Expense Ratio ____0.11%
Minimum Money Market Account Investment _______$3,000
#24) Fidelity California Municipal Money Market Fund — FCFXX
Annual Money Funds Management Expense Ratio ____0.11%
Minimum Money Market Account Investment _______$5,000
#25) Fidelity Michigan Municipal Money Market Fund — FMIXX
Annual Money Funds Management Expense Ratio ____0.11%
Minimum Money Market Account Investment _______$5,000
#26) Fidelity Pennsylvania Municipal Money Market Fund — FPTXX
Annual Money Funds Management Expense Ratio ____0.11%
Minimum Money Market Account Investment _______$5,000
#27) Fidelity California AMT Tax-Free Money Market Fund — FSPXX
Annual Money Funds Management Expense Ratio ____0.12%
Minimum Money Market Account Investment _______$25,000
#28) Fidelity Connecticut Municipal Money Market Fund — FCMXX
Annual Money Funds Management Expense Ratio ____0.12%
Minimum Money Market Account Investment _______$5,000
#29) Vanguard New Jersey Tax-Exempt Money Market Fund Investor — VNJXX
Annual Money Funds Management Expense Ratio ____0.12%
Minimum Money Market Account Investment _______$3,000
#30) Vanguard New York Tax-Exempt Money Market Fund Investor — VYFXX
Annual Money Funds Management Expense Ratio ____0.12%
Minimum Money Market Account Investment _______$3,000
#31) Fidelity New York Municipal Money Market Fund — FNYXX
Annual Money Funds Management Expense Ratio ____0.12%
Minimum Money Market Account Investment _______$5,000
#32) Vanguard Ohio Tax-Exempt Money Market Fund — VOHXX
Annual Money Funds Management Expense Ratio ____0.12%
Minimum Money Market Account Investment _______$3,000
#33) Fidelity Ohio Municipal Money Market Fund — FOMXX
Annual Money Funds Management Expense Ratio ____0.312%
Minimum Money Market Account Investment _______$5,000
#34) Schwab California Money Market Fund Value Advantage — SWKXX
Annual Money Funds Management Expense Ratio ____0.13%
Minimum Money Market Account Investment _______$25,000
#35) T Rowe Price Maryland Tax-Free Money Market Fund — TMDXX
Annual Money Funds Management Expense Ratio ____0.13%
Minimum Money Market Account Investment _______$2,500
#36) Fidelity New York AMT Tax-Free Money Market Fund — FSNXX
Annual Money Funds Management Expense Ratio ____0.13%
Minimum Money Market Account Investment _______$25,000
#37) T Rowe Price New York Tax-Free Money Market Fund — NYTXX
Annual Money Funds Management Expense Ratio ____0.13%
Minimum Money Market Account Investment _______$2,500
#38) Schwab New York AMT Tax-Free Value Advantage — SWYXX
Annual Money Funds Management Expense Ratio ____0.14%
Minimum Money Market Account Investment _______$25,000
#39) Fidelity New Jersey AMT Tax-Free Money Market Fund — FSJXX
Annual Money Funds Management Expense Ratio ____0.15%
Minimum Money Market Account Investment _______$25,000
#40) Fidelity New Jersey Municipal Money Market Fund — FNJXX
Annual Money Funds Management Expense Ratio ____0.15%
Minimum Money Market Account Investment _______$5,000
Notes about this list:
1) You can just buy index funds directly from a mutual fund company that values direct relationships with the investing public. You do not have to waste your hard-earned money on the sales loads and 12b-1 fees that deplete your investment assets, when you buy a money market savings fund through a financial adviser or investment counselor. While it is a waste of money, there many individual investors who pay loads and other fees, when they invest in money market funds through a broker.
2) Here are links to the home pages of the money market mutual funds companies in the list top 40 low cost best money market funds above. Most of these websites have readily available search functions or other methods to find the particular funds listed above. If you have any difficulties finding these funds, search with Google using the ticker symbol. The ticker symbol is the five capital letters at the end of the fund names listed above.
3) This list of the top 40 low cost best money market funds was developed using data base screening methods, which excluded money market funds that did not meet the selection criteria. No analysis or due diligence of any kind was performed on any of these top 40 low cost best money market funds. This list of top 40 low cost best money market funds is solely for your information and is not investment advice or a solicitation or offer to sell securities or other financial services. There could be errors with this information, and it is your responsibility to verify all information, before you make any personal financial decision.
How this list of the top 40 low cost best money market funds was developed
To develop this list we used the screening methods described below. We have found that lists of low cost investment mutual funds and ETFs developed using these screening methods tend to be quite stable over time. Things may have changed since this article was written, and you should always verify information before investing.
The reasons are quite simple why a list like this tends to be relatively stable. If a mutual fund company competes on price, it keeps competing on price. If it offers low turnover, low fee, passively managed index mutual funds, it tends to keep offering the same.
The top 40 low cost best money market funds in the list below were selected using a process of elimination following the Best No Load Funds selection criteria. As a starting point the universe of potential money market funds was obtained using data from Lipper and/or Morningstar.
This universe of mutual funds was then automatically screened according to these fund selection rules:
- No charges for 12b-1 fees and mutual fund sales loads. (We do not believe that any these money market savings accounts require financial advisor sales load charges nor any 12b1 fees.),
- Lower investment management expenses (All have very low asset management fees),
- Lower portfolio turnover (Because money market funds tend to invest in securities of very short duration, their rates of portfolio turnover are very high compared to most stock and bond mutual funds. Therefore, portfolio turnover is not a useful differentiator between money funds.),
- Avoid very large actively managed mutual funds (None of these funds appear to have an active management strategy.),
- Avoid very new mutual funds (All these funds are at least three years old.),
- Eliminate very small mutual funds (All of these funds have at least $500 million in portfolio assets.), and
- Screen out inferior ETF and mutual fund performance (None had consistently inferior 1-year, 3-year, and 5-year performance. Generally, they have performed quite well. )
