{"id":911685,"date":"2026-11-09T21:56:16","date_gmt":"2026-11-09T21:56:16","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/911685\/"},"modified":"2026-11-09T21:56:16","modified_gmt":"2026-11-09T21:56:16","slug":"why-can-money-market-funds-make-sense-when-rates-are-rising","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/911685\/","title":{"rendered":"Why can money market funds make sense when rates are rising?"},"content":{"rendered":"

higher interest rates<\/a> are generally viewed negatively as a \u201cdrag on the economy, a burden for people seeking mortgages and a punishing hurdle for stocks,\u201d said The New York Times<\/a>, they are also an \u201cunambiguous boon in one unheralded area: money market funds.\u201d For this specific type of mutual fund, \u201chigher rates almost immediately funnel more money to investors without major complications.\u201d Here is what to know about them.<\/p>\n

What are money market funds?<\/p>\n

This type of mutual fund<\/a> invests in \u201chighly liquid, near-term instruments\u201d such as \u201ccash, cash equivalent securities and high-credit-rating, debt-based securities with a short-term maturity, such as United States Treasuries,\u201d said Investopedia<\/a>. Like other types of mutual funds, money market funds pool money from numerous investors to buy into these investments, which then earn interest that the fund pays out to investors as dividends.<\/p>\n

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Money market funds have a \u201cfixed price of $1 per share,\u201d and they \u201caim to maintain their net asset value (NAV),\u201d which \u201cmeans your account value shouldn\u2019t change other than any growth from your earnings,\u201d said Vanguard<\/a>. Their yields can vary, however.<\/p>\n

When can money market funds make sense to invest in?<\/p>\n

The goal of investing in a money market fund is generally to \u201ckeep your money\u2019s value stable, easy to access and earning a competitive interest rate until you need it,\u201d said Schwab<\/a>. Money market funds tend to generate higher income than you would typically earn with a bank account.<\/p>\n

At the same time, they are \u201cless prone to market fluctuations than many other types of investments,\u201d said Fidelity<\/a>. They are also \u201csubject to less interest rate risk than longer-maturing bond fund investments\u201d due to their focus on near-term instruments. This translates to providing some level of safety and stability.<\/p>\n

Money market funds are potentially most advantageous in a rising-rate environment. \u201cWhen rates are rising, income from money market funds will typically rise as well,\u201d said Vanguard.<\/p>\n

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Are there risks to money market funds?<\/p>\n

One important thing to note about money market funds is that, unlike savings accounts and CDs, they are not FDIC-insured. Instead, as securities, they are protected by the SIPC. Investing always carries the risk of loss.<\/p>\n

You will also want to be aware that the \u201cincome generated by money market funds typically won\u2019t protect you against the loss of purchasing power over time due to inflation<\/a>,\u201d said Schwab. While the returns from a money market fund are likely \u201cbetter than the nearly nothing you would receive in a standard checking account,\u201d they are \u201cso small, they are barely visible\u201d when compared to investments like stocks, said the Times. Still, the stability and small wins they offer when rates are rising can make them worthwhile.<\/p>\n","protected":false},"excerpt":{"rendered":"Follow us Add us as a preferred source on Google Newsletter Subscribe to our newsletter Amid rising interest…\n","protected":false},"author":2,"featured_media":911686,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[37],"tags":[28,112],"class_list":["post-911685","post","type-post","status-publish","format-standard","has-post-thumbnail","category-markets","tag-business","tag-markets"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/911685","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=911685"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/911685\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/911686"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=911685"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=911685"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=911685"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}