Best Money Market

  

The best money market is composed of money market funds that have existed for more than 35 years. The best money market funds pay higher interest rates compared to the normal savings account interest rates. In this way the best money market funds help the investors to combat the rising interest rates.

Nowadays the banks have introduced the high yielding savings account that have interest rates that are at par with the interest rates offered by the money market funds. But still the investors have a mark up in their financial positions by investing in best money market funds since they can diversify their portfolio by investing in a variety of money market instruments.

Advantages of investing in best money market funds

•  Greater options : The best money market funds can be broadly categorized into two-the taxable and second the tax-exempt money market fund.

Tax exempt money market funds

The money market funds hold short-term municipal debt that is generally tax-free. In this aspect the money market funds are superior to the savings account and the CDs since they are always victims of the federal income tax . But the disadvantage is that the yields on such tax-exempt money market funds have lower yields as compared to the investments that are not tax-free. There is always a specific type of money market fund in the particular state that is free from the state tax.

Taxable money market funds

There are a variety of taxable money market funds. There are some taxable money market funds that hold short term Treasury Bills only. These are the more secure form of money market funds. They are free from the state tax but not the federal income tax. There is also a category of taxable money market funds that hold debt of government-sponsored agencies like the Fannie Mae and Freddie Mac. But these funds are not as safe as Treasuries. There are some other taxable money market funds that hold short-term corporate debt . The higher rates offered by these money market funds are accompanied by high default risk.

•  Greater Flexibility

The best money market accounts facilitate the investors in moving their money out of the funds unlike the case of the savings account where the money invested is tied for a certain period of time. Here the investor can withdraw money from his fund simply by writing a check. Transfer of money between the money market fund and the bank account can also take place. Although the high yielding savings Account allows transfer of money to other different accounts, nevertheless the process is very slow. Although the Commercial Deposits offer high rates of interest accessibility is minimum in that case.

•  Best Interest Rates

The best money market funds offer the best interest rates. Vanguard’s Prime Money market and the Fidelity’s Cash Reserve and Government reserve have interest rates 5.22% and 5.09% respectively. Talking about the tax free funds the Alpine Municipal is among the best money market funds that offer a tax rate of about 3.91%.

To gather more knowledge about the best money market funds , site to be viewed are smartmoney.com, bankrate.com, fool.com, bankaholic.com etc.