How to Buy U.S. Treasury Money Market Funds
- 1). Review the three styles of money market funds (MMFs). MMFs are "cash equivalent" funds. That is, they are designed to be fairly liquid. Treasury-only MMFs are considered to be the safest of the three styles of MMF; they offer a lower yield than government (based on government agency securities) or prime (based on the prime rate) MMFs.
- 2). Understand the structure of the MMF. MMFs have different structures. For instance, Fidelity's Treasury-only MMF contains 94 percent assets in U.S. Treasury bills maturing in less than six months, and the remaining amount is in Treasuries maturing six to nine months. You can determine this from the prospectus.
- 3). Ask about the minimum investment required. The minimum investment for Treasury-only MMFs can be higher than other MMFs or "cash" funds. For instance, Fidelity's minimum investment is $25,000, 10 times the amount of Fidelity's other MMFs. You can also find this in the annual report or prospectus.
- 4). Determine the expense ratio (MER). You want an MMF with a low MER; however, the expense ratio is often higher for Treasury-only MMFs. The expense ratio for Fidelity is .49 percent higher than other Fidelity MMFs. You can also find this information in the annual report or prospectus.
- 5). Determine the yield. Due to the "safety" of Treasuries, the yield is also lower than government or prime MMFs. You can get an estimate by looking at the historical yield in the annual report.
- 6). Make a purchase. If you know what you want, obtain the symbol and either ask your broker to purchase shares, call the MMF up directly (contact information is in the annual report) or make a purchase through your online broker. Two well-known Treasury MMFs are the Weiss Treasury Only Money Market Fund (WEOXX) and Fidelity's U.S. Only Money Market Fund (FDLXX).
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