Your Idle Cash Is Sitting in Vanguard’s VMFXX, and It’s Doing More Work Than You Think

The Vanguard Federal Money Market Fund (VMFXX) is an automatic investment destination for any uninvested cash you may have in a Vanguard brokerage account. This fund is Vanguard's largest government money market fund and serves as the account's default settlement vehicle for many retail brokerage accounts. It primarily invests in short-dated U.S. government securities, such as Treasury bills and repurchase agreements, with an expense ratio of just 0.11%.

As a result, VMFXX generates a higher yield than a standard checking account, currently yielding around 4% on short-term Treasuries. This yield is reflective of the current short-term Treasury rates, which are elevated due to the Federal Reserve's stance at a target upper bound of 3.75%. The fund's expense ratio is lower than those of money market funds sold through banks or full-service brokers, making it a more cost-effective option.

While VMFXX is among the safest mutual fund investments, it does not provide FDIC insurance and is subject to investment risk, as it holds short-duration government paper that constantly rolls over. The fund's performance is tied to short-term Treasury rates, which can change with the Federal Reserve's decisions. This makes VMFXX a suitable choice for investors seeking a market yield for their brokerage cash, emergency reserves, or short-term savings, without actively managing the funds themselves.