Whether it’s for short-term liquidity or as part of a conservative income portfolio, you’re likely to find what you need amid the low-cost selection of Vanguard money market funds.
The primary reasons investors use money market funds are to meet some kind of short-term need, such as an emergency fund or a temporary holding place for investment funds, to preserve the investors’ principal, or for current income.
The relative safety of money market funds means yields are low compared to bonds and dividend stocks. But the yields are significantly higher than rates of interest earned in deposit accounts at banks, such as a savings account.
No matter what the investor’s objective, it is crucial to keep costs low money market funds. This is where the ultra-low expense ratios of Vanguard’s money market funds makes a difference and it’s how these funds outperform comparable money market funds.
There are two basic categories of money market funds: 1) taxable money market funds and 2) tax-exempt money market funds. Taxable money market funds are ideal for tax-deferred accounts like IRAs and 401(k)s. Tax-exempt money market funds are ideal for taxable accounts.
Taxable Vanguard Money Market Mutual Funds
Vanguard Prime Money Market (MUTF:VMMXX): The VMMXX fund is a taxable money market fund that invests in short-term, high-quality securities, such as bank acceptances, certificates of deposit, U.S. commercial paper, and U.S. Treasury bonds. VMMXX has historically produced higher yields than other Vanguard money market funds, as well as the majority of money market funds offered at other firms. VMMXX currently yields 0.78%. Expenses are 0.16%, or $16 for every $10,000.
Vanguard Federal Money Market (MUTF:VMFXX): Vanguard’s VMFXX is a taxable money market fund that invests in U.S. government securities, such as U.S. Treasury bills and U.S. government obligations. Therefore investors looking for a conservative taxable money market fund my want to consider a fund like VMFXX. With greater relative safety of principal, investors should expect a slightly lower yield, which is currently 0.48%. The expense ratio is 0.11%, or $11 for every $10,000.
Tax-Exempt Vanguard Money Market Funds
California Tax-Exempt Money Market (MUTF:VCTXX): This money market fund from Vanguard offers tax-exempt income on the federal level. Income may also be tax-exempt at the state level for citizens of California. The yield is currently 0.51% and the expense ratio is 0.16%.
New Jersey Tax-Exempt Money Market (MUTF:VNJXX): This money market fund from Vanguard offers tax-exempt income on the federal level. Income may also be tax-exempt at the state level for citizens of New Jersey. The yield is currently 0.49% and the expense ratio is 0.16%, or $16 for every $10,000.
New York Tax-Exempt Money Market (MUTF:VYFXX): This money market fund from Vanguard offers tax-exempt income on the federal level. Income may also be tax-exempt at the state level for citizens of New York. The yield is currently 0.53% and the expense ratio is 0.16%, or $16 for every $10,000.
Ohio Tax-Exempt Money Market (MUTF:VOHXX): This money market fund from Vanguard offers tax-exempt income on the federal level. Income may also be tax-exempt at the state level for citizens of Ohio. The yield is currently 0.48% and the expense ratio is 0.16%, or $16 for every $10,000.
Pennsylvania Tax-Exempt Money Market (MUTF:VPTXX): This money market fund from Vanguard offers tax-exempt income on the federal level. Income may also be tax-exempt at the state level for citizens of Pennsylvania. The yield is currently 0.49% and the expense ratio is 0.16%, or $16 for every $10,000.
Tax-Exempt Money Market (MUTF:VMSXX): This money market fund from Vanguard offers tax-exempt income on the federal level. The yield is currently 0.56% and the expense ratio is 0.15%, or $15 for every $10,000.
As of this writing, Kent Thune did not personally hold a position in any of the aforementioned securities. His No. 1 holding is his privately held investment advisory firm. Under no circumstances does this information represent a recommendation to buy or sell securities.
