Why Are Investors Flocking to Money Market Funds?

Stocks have been on a rollercoaster ride as investors struggle to decipher the impact of President Trump’s tariffs. Many have sought safer investments, waiting for clearer trade policies.

Last week, assets in money market funds topped $7 trillion, according to the Investment Company Institute. These funds have been particularly popular with both institutional and retail investors, thanks to attractive short-term interest rates.

Even the Oracle of Omaha has accumulated a record amount of cash, which Berkshire Hathaway (BRK.A) primarily invests in Treasury bills. Retail investors can use money market funds as a relatively safe option for managing their cash while benefiting from attractive interest rates.

Most money market mutual funds are required to maintain a net asset value (NAV) of $1 per share. While their shares do not appreciate, investors receive regular dividends, allowing their investments to grow over time.

Government money market funds invest in Treasury bills and agency bonds, including those issued by Fannie Mae and Freddie Mac. In contrast, prime money market funds hold both corporate and government securities.

Municipal money market funds are particularly appealing to high-income investors, as the interest earned is generally exempt from federal income tax and, in many cases, state income tax as well.

For those who prefer ETFs, money market ETFs are now available, adhering to SEC money market rules under Rule 2a-7.

To learn more about the Texas Capital Government Money Market ETF MMKT, iShares Government Money Market ETF GMMF, and iShares Prime Money Market ETF PMMF, please watch the short video above.

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This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research