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Vanguard Money Market Rates – 3-yr 1.44% Average Yield

Vanguard money market rates are much higher than most bank savings accounts. Vanguard money market funds are very low risk investment, just like bank accounts, since they invest in cash, cash equivalents and short term debts.

Though their rates are competitive, Vanguard requires a minimum of $3,000 to open a money market fund. That can be a lot for most investors, especially beginners with very little money. Still, an average 3-year Vanguard money market fund carries a 1.49% interest rate that far exceeds most rates you’d get from a bank.

Note, if you have questions beyond money market rates, a financial advisor can help you determine the best saving options to help you reach your goals.

Many people include money market funds in their investment or savings portfolio. Thus, if you’re looking for a better interest rate on your hard money, you should consider opening a Vanguard money market fund.

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What is a Money Market Fund?

Before we delve into Vanguard money market rates, you need to have an understanding of what a money market fund is.

A money market fund is a type of mutual fund. It provides investors quick liquidity to their cash, provides current income, and protects the investors’ principal.

Unlike other mutual funds which focus on other securities such as stocks and bonds, money market funds invest in “money market” securities. Large companies and corporations, financial institutions and the U.S. government borrow money by issuing “money market” securities as promises to repay the debts.

For instance, the U.S. government borrows money by selling bonds or Treasury bills or notes. Banks borrow money by selling certificate of deposit (CDs). Big companies borrow money by issuing IOUs called commercial paper. These money market securities make up the money market fund.

Mutual fund and investment companies such as Vanguard and Fidelity offer these investments. They are low risk and they provide high yield. Some funds are intended for retail investors. Retail investors are natural investors like you and me. On the other hand, there are funds that are intended for institutional investors. Those funds usually require high minimum investments.

Who is a Money Market Fund Good For?

As mentioned above, a money market fund invests in cash, cash equivalents, and short-term debt securities. You should consider them for the following reasons:

  • You’ll need your money within the next 3 to 6 months.
  • You’re saving for adown payment to buy a house.
  • Have $3,000 to open the account.
  • You need quick access to your money.

Overview of Vanguard Money Market Funds

Vanguard has four money market funds with different rates. As mentioned above, money market funds generally invest in certificate of deposit (CDs), commercial paper, US Treasuries, Bankers’ Acceptances, and repurchase agreements. See in more detailed below:

Vanguard Federal Money Market Fund Rate (VMFXX)

This Vanguard money fund is perhaps the safest and most conservative of all funds, simply because they invest in short-term U.S. government securities.

U.S. guaranteed securities are considered risk-free investments. It intends to provide current income while maintaining liquidity.

This Vanguard fund requires a $3,000 initial minimum investments. It has a 0.11% expense ratio.

This Vanguard money market fund as a 1-yr 0.05% rate; 3 year 1.25% rate and a 5-yr 1.07% rate.

So, if you have a short term goal and are interested in a Vanguard fund that invests in U.S government securities, you may wish to consider this fund

Vanguard Treasury Money Market Fund Rate (VUSXX)

As the name suggests, this Vanguard money fund only invests in U.S. Treasury bills. However, the fund has a minimum initial investment of $50,000.

It may be out reach for beginner investors with little money. But the expense ratio is 0.09%.

The rates for this Vanguard money market fund are as follows: 1-yr 0.05%; 3-yr 1.26% and 5-yr 1.07%. If you desire a stable and low risk short-term investment, you should consider this fund.

Vanguard Municipal Money Market Fund Rate (VMSXX)

This Vanguard fund invests in short-term, high quality municipal securities.

What makes this fund a great one is that it provides income that is exempt from federal personal income taxes.

If you are in a higher tax bracket and are looking for a competitive tax-free yield, you should consider this fund.

Similar to other funds, the initial minimum investment is $3,000 with a 0.15%. This Vanguard money market fund has a current rate of 1.20% and a 10 year yield of 0.44%.

The Vanguard Cash Reserves Federal Money Market Fund Rate (VMMXX).

This Fund is perhaps one of the best out there.

However, this fund requires a minimum deposit of $3,000 just to open an account. This can be steep for a beginner investor with little money. The expense ratio is 0.16%.

The rates for this Vanguard money market fund are as follows: 1-yr 0.04%; 3-yr 1.34% and 5-yr 1.21%.

There is no purchase or redemption fees. The fund has a total asset of $127.5 billion as of January 2020.

The Vanguard Cash Reserves Money Market fund primarily invests in foreign bonds, U.S. treasury bills, and U.S Government obligations.

Overall, you should consider investing in these Vanguards money market funds, because they generally have better rates than bank savings accounts.

But the FDIC does not insure you. However, they are very safe. If the lack of FDIC insurance does not bother you, you should try them.

Work With A Financial Advisor Near You

If you have questions beyond Vanguard money market mutual funds, you can talk to a financial advisor who can review your finances and help you reach your goals. Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.

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2 Replies to “Vanguard Money Market Rates – 3-yr 1.44% Average Yield”

  1. I’ve got several years of living expenses sitting in VMFXX because I already have all the index fund and stock exposure I want and bonds don’t seem any better than money markets right now. That was fine as long as inflation was low but it seems to be creeping up now so it is clearly losing purchasing power. But it is a form of diversification and insurance since I’m in the withdrawal phase of my investing now.

    1. Hello there! Thank you for stopping by and leaving a comment. Yes, I agree. Money market funds, like Vanguard, is a good alternative for your money and their rates are very competitive comparing to banks savings accounts. Plus, they are very safe since the money invested in money securities as opposed to stocks.

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