Highest-Yielding Money Market Funds
Everyone wants to receive the highest rate possible on their investments. Money market funds are flexible savings vehicles allowing access to funds. The downside is there is a price to pay for the privilege of easy availability. The price is the interest rate earned. Interest rates are lower on money market mutual funds than other investment vehicles because the investor pays for the privilege of immediate retrieval with lower interest rates.
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Money Market Funds
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Money market funds provide a place to park money the individual may need quickly. The funds invest in short-term, high-quality debt securities. These include commercial paper, U.S. government-backed financial instruments, Treasury securities, and municipal debt. The U.S. Securities and Exchange Commission issued new rules concerning money market funds following the 2008 financial crisis. The weighted average of the debt maturities funds hold must be 60 days or less. Funds must disclose their holdings on their website every month. Although the funds are not insured, they are considered risk-free investments. A money market fund can lose investor funds, but that would be a rare occurrence.
Comparing Funds
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Investigate the expense ratios of funds that may be purchased. In low-interest rate environments expenses can make the difference between profit and loss. Some mutual fund companies are artificially sustaining funds that would normally have a negative return. When interest rates begin to increase again these funds will be laggards, putting off raising interest rates, attempting to make up some of the money lost during the previous low-interest rate years.
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Researching High Yield Funds
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A number of financial websites list average money market fund yields and the highest yielding funds. Money-rates is one of these sites. The top money market funds are listed with the name of the institution, the seven day yield, the minimum amount required to open an account, and a link to the fund. The rate of the highest-yielding money funds on the list as of March 4, 2011 was just below 0.20 percent. That would mean an individual investing $10,000 would receive less than $2.00 a year in interest. Tax-free money market yields were slightly lower. The companies offering the highest yielding funds were Flex-Funds, Harbor Funds, TCW Funds, and PayPal. The PayPal fund is managed by Barclays Global Investor and requires a deposit of only $1.00 to open an account.
Fund Information on the Web
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Crane Data lists the highest yielding money market funds in three categories: institutional, retail and tax-exempt. The Dreyfus Money Market and TCW Money Market Fund were the highest yielding retail funds as of March 4, 2011, both indicating a seven-day yield of 0.13 percent. The New York Times lists the highest yielding funds on its Consumer page. The Wall Street Journal carries a long list of money market funds with current yields.
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