Instead of spending hours comparing the best high-yield savings account rates online, why not take a different approach? Consider ditching the HYSA entirely and putting your cash to work in a brokerage account.
By investing in a money market fund, you can earn the current risk-free rate while enjoying the convenience of monthly distributions and daily liquidity.
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“Consumers are savvy — they will not settle for a 1% interest rate at their bank if they can easily invest in a money market fund and earn five times the return,” says James P. Dowd, CEO at North Capital.
Money market funds are a special type of mutual fund designed for safety and stability. Their net asset value, or NAV, is typically pegged at $1 per share, making them a very low-risk option for investors.
“Money market funds invest in very liquid, short-term securities with the objective of preserving your capital, while also providing income at prevailing market rates,” says Nafis Smith, principal and head of taxable money markets at Vanguard.
Depending on the type of fund, holdings can include Treasury bills, repurchase agreements, commercial paper, certificates of deposit and municipal bonds — all of which share a low risk of default, minimizing credit risk.
“The risk associated with money funds is very low, given that the SEC mandates that only securities with high credit quality and shorter maturities are eligible holdings,” Smith says.
As with HYSAs, shopping around is key. Different money market funds charge varying expense ratios, which can impact the fund’s performance and yield.
One metric to watch is the seven-day SEC yield, which represents the annualized return an investor would receive over a seven-day period after accounting for fees. By comparing these yields, you can find the best money market fund to maximize your earnings.
Here are seven of the best money market funds to buy for 2025:
| Money market fund | Expense ratio | 7-day SEC yield |
| North Capital Treasury Money Market Fund (ticker: NCGXX) | 0.00% | 4.6% |
| Vanguard Federal Money Market Fund (VMFXX) | 0.11% | 4.5% |
| Vanguard Treasury Money Market Fund (VUSXX) | 0.09% | 4.5% |
| Fidelity Money Market Fund (SPRXX) | 0.42% | 4.3% |
| Schwab Value Advantage Money Fund – Investor Shares (SWVXX) | 0.34% | 4.4% |
| Fidelity Tax-Exempt Money Market Fund (FMOXX) | 0.42% | 2.7% |
| Schwab California Municipal Money Fund – Investor Shares (SWKXX) | 0.34% | 2.5% |
North Capital Treasury Money Market Fund (NCGXX)
Keeping expense ratios low maximizes a money market fund’s seven-day SEC yield, but low-cost options are often limited to institutional funds with high minimums. One fund, NCGXX, stands out by offering institutional-class shares with no minimum investment. Thanks to a fee waiver reducing its expense ratio to 0%, NCGXX currently delivers a very competitive seven-day SEC yield of 4.6%.
“By offering an institutional share class with same-day liquidity to institutions and individuals, we hope to encourage all types of investors to incorporate NCGXX into their liquidity management,” Dowd says. NCGXX is classified as a “government” money market fund, which means it must hold 99.5% of its assets in securities issued or guaranteed by the U.S. government or its agencies.
Vanguard Federal Money Market Fund (VMFXX)
“Money market funds are highly correlated with short-term interest rates,” Smith says. “If you look backward at how much the federal funds target rate has changed over the past year, you’ll see that money market rates have moved in lockstep with them.” Rates have fallen recently from the 5%-plus levels investors were earning throughout 2023, but they still remain competitive overall.
The current federal funds rate target range sits between 4.25% to 4.5%. Unsurprisingly, most money market funds like VMFXX will fall within this range. After a 0.11% expense ratio, VMFXX’s seven-day SEC yield sits at 4.5%. As with NCGXX, VMFXX is classified as a government money market fund. However, Vanguard requires a $3,000 minimum initial investment to access VMFXX.
Vanguard Treasury Money Market Fund (VUSXX)
“Money market funds can be a great way to save for short-term goals like buying a car, a down payment or building your emergency savings,” says Sophoan Prak, a certified financial planner and financial advisor at Vanguard. “Generally, if you have a planned expense within one year, a money market fund can be a good investment option for it.” Another option from Vanguard to consider is VUSXX.
VUSXX is also a government money market fund. However, as with NCGXX, it only focuses on a specific subset of government-issued fixed income: T-bills. This gives it slightly higher credit quality compared to VMFXX, although the difference is negligible overall. Investors can expect a 4.5% seven-day SEC yield and a slightly lower 0.09% expense ratio. VUSXX also has a $3,000 minimum investment requirement.
[See: 10 of the Best Stocks to Buy This Year.]
Fidelity Money Market Fund (SPRXX)
“Prime money market funds invest in debt securities issued by corporations, government agencies and government-sponsored entities,” says Jeff Fisher, managing principal and head of investment strategy at Peapack Private, the wealth division of Peapack-Gladstone Bank. One of the most popular prime money market funds available is SPRXX, which currently has $118.9 billion in portfolio net assets.
SPRXX takes on slightly higher credit risk compared to government money market funds like VMFXX. In addition to the usual T-bills and repurchase agreements, the fund also holds certificates of deposit, time deposits and commercial paper. However, the seven-day SEC yield of this fund sits lower at 4.3% because of a higher 0.42% expense ratio. That being said, it has no minimum investment requirement, making it easier for casual retail investors to access.
Schwab Value Advantage Money Fund – Investor Shares (SWVXX)
If you’re investing with Schwab instead of Fidelity, SWVXX is the money market fund to consider. As with SPRXX, SWVXX is a prime money market fund, holding the usual Treasurys, repurchase agreements, time deposits and commercial paper. It is well-capitalized with $214 billion in assets, has been around since 1992 and is very accessible to retail investors with no minimum investment requirements.
However, SWVXX trumps SPRXX in one meaningful way: fees. It charges a lower 0.34% expense ratio, and the fund delivers a slightly higher 4.4% seven-day SEC yield. But for high-net-worth investors with at least $1 million to invest, there’s an alternative: the Schwab Value Advantage Money Fund — Ultra Shares (SNAXX). This institutional fund charges a lower 0.19% expense ratio and pays a higher 4.6% seven-day SEC yield.
Fidelity Tax-Exempt Money Market Fund (FMOXX)
If you’re a high-net-worth investor, it might be worth glossing over expense ratios and seven-day SEC yields to focus on taxes instead. This is because the income from most money market funds is taxed rather inefficiently. If you’re in a high tax bracket, the yield you receive net of taxes can be significantly lower. Outside of a tax-sheltered account, this can greatly reduce your total returns.
The solution is a tax-exempt money market fund. “Tax-exempt money market funds invest in debt securities issued by states, counties, school districts and other municipal borrowers,” Fisher says. “This income is exempt from U.S. income taxes and, in some instances, from state income taxes.” One option here is FMOXX, which charges a 0.42% expense ratio and pays a 2.7% seven-day SEC yield, which equates to a tax-equivalent yield of 4.7%.
Schwab California Municipal Money Fund – Investor Shares (SWKXX)
California has some of the highest income tax rates in the U.S., so if you live there, consider a state-specific money market fund like SWKXX. This fund invests in money market securities issued by the state of California and its municipal agencies. The big advantage? Its income is exempt from both federal and California state income taxes, making it a tax-efficient option for residents.
SWKXX charges a reasonable 0.34% expense ratio, in line with Schwab’s other money market funds. It currently delivers a 2.5% seven-day SEC yield. If you have at least $1 million to invest, you can earn an even higher yield with the Schwab California Municipal Money Fund – Ultra Shares (SCAXX). This institutional fund charges a lower 0.19% expense ratio and offers a higher 2.7% seven-day SEC yield.
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7 Best Money Market Funds to Buy for 2025 originally appeared on usnews.com
Update 12/20/24: This story was previously published at an earlier date and has been updated with new information.
