From Yahoo Finance: 2025-05-13 05:03:00

Investors who are parking cash in money market funds during market volatility may be paying high fees. The average money market fund fee is 0.38%, significantly higher than index equity mutual funds at 0.05%. To avoid overpaying, consider third-party funds with lower fees or bond index ETFs at 0.10%.

Money market funds invest in short-term, high-quality debt securities for liquidity and stability. While cheaper funds are preferred, they should be used short-term. Holding them long-term may not grow your money due to low interest rates. The Rule of 72 estimates doubling money; the average money market fund yield is 4.14%.

Resist solely using fees to decide investments. Focus on net returns to avoid missing out on outperforming funds. For example, a $10,000 investment in Vanguard’s low-cost index fund since 1976 would have earned $1,704,343, whereas American Funds could have netted $2,455,295 with a 5.75% sales charge.

Some experts argue that higher expense ratios can be worth it for funds that actively research companies. Active managers aim to justify high fees by picking winners. Research from Wharton shows that active managers often struggle to do this, but when they succeed, they deserve compensation for their work.



Read more at Yahoo Finance: Is your money market fund too expensive? Why high fees may (or may not) be worth it.