Best Money Market Fund

[throw123112]

I see a lot of threads on money market funds and just wanted to give some advice on how I think about it. I think that going with the safest option is best as you don’t get paid that much to take extra risk. So the best money market fund isn’t actually a money market fund but just owning Treasury bills outright. This is guaranteed by the US government so it is equivalent to an FDIC insured account. Since you own them outright you don’t have to pay any expense ratio. If you get short duration 4 week bills you aren’t also exposed to any interest rate risk. The second best option is investing in a money market fund that exclusively invests in Treasury bills and bonds. Repurchases are not bulletproof safe since you have counterparts risk. At Fidelity this is FDLXX (although this has an absurdly high expense ratio at 0.42%) and at Vanguard it is VUSXX. There is a reason everyone flocks to these when they are crises in the stock market, it’s because they only consists of direct Treasury purchases so don’t have all the other shenanigans of investing in non US guaranteed government securities (like Fannie Mae) or commercial paper issued by corporations. That’s my 2 cents. Do with this information what you will.

[LadyGeek]

This thread is now in the Investing - Theory, News & General forum (general discussion).

[anon_investor]

If you demand absolute safety, then rolling 1 month T-Bills makes the most sense. But most people think a government money market fund like VMFXX is probably safe enough.

I just bough T-Bills (1 mo) for the first time at Fidelity and put them on autoroll. But I am still stashing cash in money market funds that are not purely treasuries.