10 Best Money Market Mutual Funds Of January 2024 – Forbes Advisor

To compile our list of the best money market mutual funds, we searched for funds with a winning combinations of some key traits:

• Wide availability. Many funds offer high yields and charge investors low fees, but the funds are available only through certain brokerages, advisors or workplace retirement plans. Instead, we generally only let funds through our screening process if Crane Data classifies them as retail funds. Likewise, we tried to steer clear of funds that charge liquidity fees or impose limits on redemptions.
• Low minimums and fees. We screened out all funds that demand initial investments of more than $3,000. And we screened for funds with the lowest expense ratios—all of our picks levy expense ratios of 0.57% or less.
• Highest possible yields. We screened out funds with 7-day yields of less than 4.47%. Seven-day yield is the industry standard for making comparisons among funds. It considers fund distributions plus appreciation, minus average fees over seven days—and then projects this average forward over the next 12 months.
• Large portfolios. We screened out funds with low asset levels. Only one has as little as just over $1 billion in assets. Six have roughly $3 billion to $50 billion in assets. Three have roughly $130 billion to more than $270 billion.

Finding funds with all of those attributes is a balancing act. A fund may excel in one or two or even three categories, but it may be a laggard in others or even be an outright failure in some categories.

Why does asset level matter? Because money market funds are not bank deposits. They are not insured by the Federal Deposit Insurance Corporation (FDIC). If a financial crisis arises, the funds that stand the best chance of preserving your principal are the biggest funds.

First, they have the deepest pockets. “It takes ample resources to withstand tough times,” Crane said. Second, more assets means more shareholders. And in a financial emergency, you’ll want as many allies as possible to sway regulators and politicians trying to decide which funds and fund complexes to help. “Having 10-to-50 million shareholders on your side doesn’t hurt if you’ve got to call on Washington for emergency support,” Crane said.

Size also matters during ordinary times as well. “The bigger the fund, generally the better its service,” Crane said. “In general, I don’t like funds at small financial firms. And I don’t want to think about limitations on access and extra fees charged by funds with weird share class letters at the end of the alphabet.”

To learn more about our rating and review methodology and editorial process, check out our guide on how Forbes Advisor rates investing products.

The author owned shares of the Fidelity Money Market Fund when this article was published. He held no positions in the other securities discussed in the post at the original time of publication.