Why Money Market Funds Are So Popular

US money market funds gathered more than $166 billion in the week ending October 7, 2026, according to Bank of America, marking their largest inflows since April 2020. Assets in money market funds have now topped $8 trillion, as these products remain popular with both institutional and retail investors due to their low risk and attractive short-term interest rates.

With the Federal Reserve expected to raise rates several times in the coming months, investors are preferring to stay at the shortest end of the yield curve and remain cautious about longer-duration bonds amid long-term inflation concerns. Even the Oracle of Omaha has accumulated a record amount of cash, most of which is invested in Treasury bills.

Investors should remember that as interest rates rise, bond prices fall, unless they invest in individual bonds and hold them to maturity. A recent Wall Street Journal survey indicated that economists expect interest rates to remain elevated for an extended period.

While stock-bond correlations have risen sharply over the past few years, cash and ultra-short-term bonds maintain virtually zero correlation with equities, offering meaningful diversification benefits to a portfolio.

Money Market ETFs: What Investors Should Know

This ETF category has attracted significant interest since Texas Capital launched the first money market ETF. Lower expense ratios compared with mutual funds and investors' preference for the ETF structure have helped drive demand. BlackRock, JPMorgan, and other providers have followed with their own money market ETFs.

Most money market mutual funds are required to maintain a net asset value (NAV) of $1 per share. Although their share prices do not appreciate, investors receive regular dividends, allowing their investments to grow over time.

Unlike traditional money market mutual funds, money market ETFs typically have fluctuating share prices and often launch with a NAV of around $100. Their NAVs may fluctuate slightly due to market demand, bid-ask spreads, and changes in underlying yields, but they generally remain close to their initial NAVs.

Government money market funds invest in Treasury bills and government agency securities, including those issued by Fannie Mae and Freddie Mac. Prime money market funds invest in a mix of corporate and government securities.

Municipal money market funds are particularly appealing to high-income investors because the interest earned is generally exempt from federal income tax and may also be exempt from state income tax.

The ProShares GENIUS Money Market ETF IQMM is the first money market ETF designed to meet the requirements of the GENIUS Act, making it eligible for investment as part of stablecoin reserves. The fund has attracted more than $19 billion in assets, in part because it serves as a cash management tool for several ProShares ETFs, including the popular ProShares UltraPro QQQ TQQQ.

To learn more about the iShares Government Money Market ETF PMMF, JPMorgan 100% U.S. Treasury Securities Money Market ETF JMMF, and IQMM, please watch the short video above.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research