Vanguard Prime Money Market Fund: Everything You Should Know

Vanguard Prime Money Market Fund

The Vanguard Prime Money Market Fund (NASDAQMUTFUND: VMMXX) is a premier low-risk investment alternative from Vanguard.

It’s ideal for short-term savings because it comes with a balanced share price and a competitive interest rate. But, investors looking for long-term performance may want to look elsewhere.

What is the Vanguard Prime Money Market Fund?

The Vanguard Prime Money Market Fund is a great way to stash your cash for a rainy day. The point is to maintain your principal investment by holding a number of quality assets in the short term. A few examples would be money market assets like Treasury Bills and CDs, for instance. This fund offers top credit quality investments with a 39-day average maturity level.

With a $1.00 stable share price, you can count on this fund to pay out every month. Because it makes investments in short-term instruments within the money market, this fund has a low payout but the amount can also be determined by the interest rate at that time.

Currently, this fund maintains a 0.48% distribution yield, which has been known to dip as far below as 0.01%. But, since its inception in 1975, the fund has maintained an average return of 5.18%.

Thanks to the balancing of interest rates, it’s expected for the fund yield to increase and get back to its normal average again. Otherwise, the fund can fluctuate wildly to reach incredible highs and really low lows.

Is Vanguard Prime Money Market Safe?

The Vanguard Prime Money Market Fund works great as a short-term investment. For instance, let’s say you want to save $10,000 from your child’s college fund. This short-term investment will enable you to keep these funds safe while making money out of it. It’s also a great way to keep your emergency savings away from reach but without the risk of losing it in some investment.

When it comes to long-term investment, it’s important to stick with stocks and bonds or invest your portfolio in funds that focus on these types of investments. That’s because stocks offer phenomenal growth for younger investors and bonds will provide you with the income you need when you retire without entering into needless risk.

However, if you fit into either of these categories and have some disposable cash lying around, then it might be worth exploring the Vanguard Prime Money Market Fund.

Can You Lose Your Money in a Money Market Account?

A money market account is a type of deposit account that’s offered by financial institutions such as banks. They often feature checking account features so that you can make debit card transactions and write checks with them. They’re quite similar to a savings account but you can only make a limited number of debit transactions a month.

According to federal rules, you can only get six free monthly debit transactions from this type of account. After that, you’ll have to pay for any other transaction. With this type of account, you can expect a higher interest rate than your average savings account, and it has a higher deposit minimum which if you fail to meet, can lead to monthly fee charges.

This is quite a safe investment because the Federal Insurance Corporation (FDIC) insured it. Thanks to this agency, you can rest assured that your money market investment is insured for up to $250,000. This means that should the institution you saved with fail, your investment will be safe.

Like we said earlier, a money market account is a very low-risk investment. That’s because financial institutions use the money from these investments to invest in low-risk, short-term securities that are stable and liquid. This includes things like commercial paper, government securities and certificates of deposit (CDs).

You then receive a return on these investments from the bank once they mature.

What Are the Best Money Market Funds to Invest In?

Here are the top picks:

  • Goldman Sachs

The prestigious Goldman Sachs Private Wealth Management is the investment management aspect of the bank. It is backed by 700 financial advisors and it’s ideal for high net worth individuals that want to secure at least $10 million or more.

  • Charles Schwab

Charles Schwab is packed full of tools to help investors succeed, no matter what experience level they have. This online platform for low-cost brokers doesn’t come with any commission fees, yet you get integrated research tools designed to help you win.

These trading platforms can be used in conjunction with banking options that make it easier to manage liquid accounts. This includes making your credit cards, savings and checking more accessible and easier to include in your investment portfolio.

  • Ally Invest

The online trading platform known as Ally Invest provides lower fees and above average rates due to its lack of overhead costs. It doesn’t have any physical local branches so customer support is offered through chat, email, phone and mobile app.

Ally Invest is perfect for beginner investors who want to test their investor knowledge from articles provided in the website. Ally Invest definitely makes an effort to empower its users into making the right investment decisions.


E*TRADE is designed for regular traders and like its competitors, it offers plenty of helpful tools for both beginners and experienced investors to benefit from. Regular traders who make a minimum of 30 quarterly trades get a $4.95 rate per trade.

Not only, that, you’ll have access to a massive research library that includes real time analyst research, quotes, and live market commentary and market data streaming.

SEC Regulations

This fund was primarily designed to offer current income and maintain your minimum through a fixed share price of $1.00. Not only that, but they offer daily liquidity.

With that said, the 2008 financial crisis changed things for the money market fund due to investors retracting large amounts of capital from the Reserve Primary Fund. This is what took the fund share price of the money market from $1.00 to $0.97.


The Securities Exchange Commission created regulations that would help prevent such issues back in 2016. This guarantees that retail the money market funds will remain at a share price of $1.00 no matter which way the market swings.

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