Selecting the Right Money Market Fund

Money Market Funds
Treasure Investment Team
December 12, 2022

Money markets are a useful financial vehicle that allow you to invest and reinvest money in one of the safest ways possible. Money market funds are a special class of mutual funds regulated by the SEC. Their designation as a special class means they are even more stringently regulated than normal mutual funds, severely limiting what the asset manager can invest in and how much risk they can take. 

There are several types of money market funds including ones that exclusively invest in short term US government bonds and ones that are allowed to invest in both short term US government bonds and short term corporate bonds. These different types of money market funds are very low risk.

Very safe and earning yield

Because money market funds are so heavily regulated, they are granted the privilege of holding their value at a steady $1. Here is the price of the Vanguard Treasury Money Market Fund (VUSXX) through time:

Talk about safe! Zero deviation from $1 price: You buy in at $1 and redeem at $1 whenever you want but on top of this, you also receive a dividend yield which isn’t accounted for in the price. The returns of money market funds come in the form of dividends, and if we look at the cumulative return over time *including the dividends* for the same fund, VUSXX, we see:

This is a very smooth return over time. Money market funds continually reinvest your money at the stipulated risk level, either allocating to short term government-backed debt securities only or short term corporate debt securities. This relieves you of the task of selecting new investments.

But which money market fund to pick?

While money market funds are a great and safe way to generate yield on idle cash, there are 1,278 to choose from! Among those, 403 are only allocating to government-backed securities! For somebody who doesn't have any experience in finance it might be a daunting task to try to allocate to a money market fund. How can one be sure they are picking the right one? 

The simple answer, have an expert do it for you. There is a wide range of performance across money market funds, and it pays to be constantly allocating to the best performing ones. As the chart shows there is a 43% difference between the average money market fund and the ones Treasure is selecting for our customers.

As an expert in cash management, Treasure uses a systematic approach to identify and invest in the best performing money market funds. We constantly reevaluate which fund will outperform going forward, and we are never beholden to a particular fund or fund manager. Use the Treasure platform to get access to the best performing money market funds without the headache and complication of trying to do it yourself.

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* Returns are projected based on current performance and are gross of fees. Treasure's fee is 35 basis points on Assets Under Management. There is no fee for Treasure Cash. Returns are subject to change daily.

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