Trust Signals
- Show expense ratio and its impact on your actual yield.
- Explain same-day vs. next-day redemption timing.
- Disclose portfolio composition (government vs. prime vs. municipal).
Savings & Income
Money Market Funds
Shop money market funds by net yield after fees, not headline rate. Compare redemption speed and sponsor stability—these matter more than an extra 10 basis points.
Headline Yield Minus Your Real Expenses
Expense ratio eats into yield. A fund with 5.5% gross yield and 0.30% expense ratio gives you only 5.2% net. A fund with 5.4% gross and 0.05% expense ratio gives you 5.35%.
Compare funds by net yield, not headline rate. The fund with slightly lower gross yield but lower fees is usually the better choice.
- Calculate net yield by subtracting expense ratio from gross yield.
- Compare net yields across the funds you're considering.
- Factor in tax implications if relevant (municipal funds).
Redemption Speed And Access During Volatility
Most money market funds redeem same-day, but not all. During market stress, some funds impose temporary gates or delays.
Check the fine print: does the fund have the right to delay redemptions? Has it done so before?
- Confirm redemption timing in the fund prospectus.
- Test one redemption during normal conditions before big moves.
- Verify whether the fund has exercised redemption gates historically.
Government vs. Prime: Which Fund Type For You?
Government money market funds invest in Treasuries and agencies (very safe, lower yield). Prime funds invest in commercial paper (slightly higher yield, more risk).
Choose based on your safety tolerance and yield needs, not just rate.
- Government funds prioritize safety and liquidity.
- Prime funds offer higher yield with added credit sensitivity.
- Municipal funds provide tax-adjusted income for some investors.
FAQ & Glossary
Are money market funds guaranteed like bank deposits?
No. They're designed for stability, but they're investment products. Safety depends on fund holdings and sponsor quality, not insurance.
When are money market funds better than high-yield savings?
They can win on net yield and integration with your brokerage, but HYSA may have easier access and FDIC insurance.
What is Money Market Fund?
A mutual fund that invests in short-term, low-risk securities like Treasuries and commercial paper. Designed for stability and liquidity.
What is Expense Ratio?
The annual fee a fund charges as a percentage of your investment, deducted from returns. Lower expense ratios mean higher net yields.
What is Gross Yield vs. Net Yield?
Gross yield is the fund's investment return before fees. Net yield is what you actually receive after expense ratio is deducted.
What is Commercial Paper?
Short-term corporate debt (typically under 270 days). Used by prime money market funds; higher yield but more credit risk than Treasuries.
What is Redemption Gate?
The right of a fund to delay or limit redemptions during market stress. Money market funds can impose gates if the fund is destabilized.
What is NAV (Net Asset Value)?
The price per share of a fund, calculated as total fund value minus liabilities, divided by shares outstanding. Money market funds aim to keep NAV at $1.00.