Money A2Z

Founded in by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. VMMXX is one of Vanguard's lowest-risk investment options. Best for short-term savings, the fund offers competitive interest rates and a stable share price.

However, for investors seeking any acceptable level of long-term investment performance, it's generally best to look at other options. The Vanguard Prime Money Market Fund is designed as an alternative to keeping money in cash, or in a savings account.

The primary objective is to preserve investors' principal by maintaining a portfolio of short-term, high-quality assets. This includes CDs, short-term U. Treasury Bills, and other money market assets.

Since the fund invests in short-term money market instruments, it tends to pay a relatively low yield, but it can fluctuate considerably depending on the interest rate environment. As of this writing, the fund's distribution yield is 0. However, the fund's average return since its inception has been 5.

When interest rates normalize, the fund's yield should rise to a level closer to that historic average, and as you can see, there have been times in the past when the fund's yield was significantly higher than the average. VMMXX Dividend Yield TTM data by YCharts. The fund's current expense ratio is 0. Investors have the ability to transfer money electronically to and from their bank account, so the fund is designed to be just as convenient as a savings account, but with a slightly higher yield.

I'd recommend the Vanguard Prime Money Market Fund as a short-term investment vehicle only. Or, if you have some emergency savings and don't want to risk losing any of it by investing, this could be a good option.

Stocks provide the growth younger investors need, and bonds can provide the income retirees need without excessive risk. If you're retired and feel more comfortable with some cash, this could be a good option for a small percentage of your portfolio, but that's about it. Matthew Frankel has no position in any stocks mentioned.

The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

The Motley Fool has a disclosure policy. Matt brought his love of teaching and investing to the Fool in in order to help people invest better. Matt specializes in writing about the best opportunities in bank stocks, REITs, and personal finance, but loves any investment at the right price.

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