Money Market Funds
Government Money Market Mutual Funds May Be a Better Alternative to Cash
David Dierking Aug 08, 2017
Investment Rationale for Government Money Market Funds
In case if you are wondering whether money market mutual funds are right for you at all, you should read this article.
The primary advantages of these funds outside of safety are that they offer daily liquidity and are free from liquidity fees imposed by the SEC. Since they invest in very short-term Treasury bills and repos, they provide easy tradability on a daily basis and you can quickly take advantage of rising rate environments. With the income from federally issued Treasury securities being state tax deductible, investors seeking to lower their tax bills may also favor government money funds.
A Few Key Risks to Consider
Government money funds also typically deliver below-average yields. As risk declines, so does return potential, and investors could be sacrificing higher yields that could be achieved elsewhere.
Check out here what the money market reforms introduced in October 2016 mean for investors.
Who Might Want to Consider Government Money Market Funds
Learn more about floating NAV for money market funds here.
Those seeking to establish a “rainy day” fund could also find government money funds appealing thanks to their safety and liquidity. Many offer check-writing capabilities for even quicker access to the money.
Funds to Consider
|Name||Ticker||Expense Ratio||Min. Initial Investment||7-Day Yield||AUM||YTD Return||3-Month Return|
|Fidelity Government Money Market Fund||SPAXX||0.42%||$2,500||0.58%||$83.9B||0.16%||0.07%|
|Vanguard Federal Money Market Fund||VMFXX||0.11%||$3,000||0.92%||$74.9B||0.30%||0.13%|
|American Funds U.S. Government Money Market Fund||AFAXX||0.38%||$1,000||0.51%||$16.9B||0.14%||0.08%|
|Gabelli U.S. Treasury Money Market Fund||GABXX||0.08%||$3,000||0.83%||$1.8B||0.15%||0.06%|
The Bottom Line
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