What is inventory and how does it work?
Buying stocks is a sensible way to invest and you can make more money as you can, as long as you can.
If you park your cash in a money market fund while waiting for the recent market volatility to sink, you may be paying your heartfelt in that safe place.
Many money market funds still have a high expense ratio, which is the administrative fee expressed as a percentage. According to the Investment Company Institute (ICI), the average money market fund fee is 0.38%, a sharp increase over the average 0.05% rate for index equity mutual funds. That is, on average, you pay $38 a year for every $10,000 you invest in a money market fund, compared to $5 for an index equity mutual fund.
Investors should be aware of this, so don’t fall into an overpaid trap to keep their cash.
What is a Money Market Fund?
A money market fund is a type of mutual fund that invests in short-term, high-quality debt securities such as T-builds and certificates of deposits. Money market funds aim to be highly liquid and stable.
How can investors find low rates?
- Look beyond brokers. Michael Brenner of FBB Capital Partners said: “If a broker provides access to third-party money market funds, they may be subject to a lower fee.”
- Try Exchange-Traded-Fund (ETF). “Think about using low-cost ETFs that have a fundamental investment that is very similar to your money market fund,” Brenner said. “These ETFs may have far lower fees than similar money market funds. Bond Index ETFs have an average fee of around 0.10%.”
Is the answer for low money market fund fees?
It’s not a bad idea while looking for a cheap money market fund, but people say that some money managers should use a money market fund for shorter periods anyway, unless they’re elderly and worried about losses anyway.
“We’re committed to providing a range of services to our customers,” said Ronnie Gilliken, president and CEO of Choice Choice in Carolina. Money market fund rates are not usually enough to meet the “72 rules” in a short time frame, he said.
The 72 rule is used to estimate how long it will take to double your money. Get the approximate number of years it takes to double your money by dividing 72 by interest rate (as a percentage). Currently, the average yield for money market funds is around 4.14% based on data from the 2025 ICI Factbook.
What about the general fees?
But money market fees need to be careful, but investors should resist the urge to use only the fees to decide whether to invest in something, Gilliken said.
Instead, people need to focus on net profits, he said. Otherwise, people could end up eliminating outperform funds from the start.
For example, take a look at the $10,000 investment in 1976, when Vanguard launched its first low-cost Vanguard 500 index fund. The fund had an expense ratio of 0.14% when it was launched and is currently down to 0.04%. If you kept it up until 2023, that investment would have earned you $1,704,343.
Compared to $2,455,295, the American Fund said it would have been acquired had the money been invested in five US stock-centered funds available at the time. Because it is net profit, according to American Funds, it includes a deduction of a maximum selling fee of 5.75% on equity funds.
The difference is that before purchasing a company’s shares, analysts from mutual fund companies visit the company, meet with the CEO and the board, acquire the company’s finances, tour the factory or production area, compete and compete, and in the case of foreign countries, assess political risks and laws.
“That’s all included in the expense ratio,” he said. “The index is just a thermometer of what’s going on,” but he doesn’t look at individual companies. “Just because your company is big and in the index doesn’t mean you need to own it.”
Some experts say that slightly higher expenses rates are worth it, according to some. Energy company Enron was on the S&P 500, but after extensive accounting fraud, he noted that he went bankrupt in the early 2000s, misrepresenting financial performance and hiding billions of dollars in debt.
Research involving the well-known Wharton Business School has shown that “active” investment managers often cannot select enough winners to justify high fees.
But sometimes, if we can find someone who can “benefit us,” Giriken said.
Medora Lee is a money, market and personal finance reporter for USA Today. mjlee@usatoday.com and Subscribe to our free daily money newsletter Personal finance tips and business news every Monday to Friday.
