Vanguard Money Market Mutual Funds are often considered a safe harbor for investors looking for stability and competitive returns. For the 10-year period ending December 31, 2024, a remarkable 6 out of 6 Vanguard money market funds outperformed their Lipper peer-group average, showcasing their consistent performance. It’s important to remember that past performance doesn’t guarantee future results, and these figures are based on mutual funds with at least a 10-year track record, as reported by LSEG Lipper.
One of the standout advantages of Vanguard money market funds is their low expense ratios. The average expense ratio for Vanguard money market funds is just 0.11%, significantly lower than the industry average of 0.24%. These asset-weighted averages, excluding Vanguard, are sourced from Vanguard and Morningstar, Inc., data as of December 31, 2023. This lower expense ratio can translate to more of your investment returns staying in your pocket.
While offering competitive yields, it’s crucial to understand the nuances of money market funds compared to traditional bank accounts. Bank accounts may provide greater liquidity, ATM access, and overdraft protection, features not typically associated with money market funds. Investors should carefully weigh these differences to determine the best fit for their financial needs and goals. Currently, Vanguard money market funds can offer significantly higher yields, potentially 10 times more than bank savings accounts. For a comparison, you can refer to the FDIC National Rates and Rate Caps for bank savings account rates and check Vanguard’s website for the most up-to-date money market fund yields.
It’s also vital to acknowledge the inherent risks of investing. All investments carry risk, including the potential loss of principal. Specifically regarding Vanguard money market funds, including the Vanguard Municipal Money Market Fund (available to retail investors), Vanguard Cash Reserves Federal Money Market Fund, and Vanguard Federal Money Market Fund, investors could lose money. Although these funds aim to maintain a stable $1.00 per share value, this is not guaranteed. These funds are not insured or guaranteed by the FDIC or any other government agency, and Vanguard is not obligated to provide financial support to these funds. Factors like market conditions can impact fund liquidity, potentially leading to fees on share sales or temporary suspensions of selling.
For those seeking a blend of competitive performance, low costs, and relative safety, Vanguard money market mutual funds present a compelling option. However, understanding the differences from bank accounts and the inherent risks is essential for making informed investment decisions.
View fund performance
Source: LSEG Lipper
Source: Vanguard and Morningstar, Inc.
Source: FDIC National Rates and Rate Caps
