Fixed income mutual funds that are invested in debt securities are known as money market mutual funds. The main characteristics of money market funds are that they have short maturities and the credit risk is also minimal. They also are a part of the lowest-volatility types of investment. Depending on the type of securities the fund invests in, money market funds are either taxable or exempted from tax. The U.S. Securities and Exchange Commission (SEC) divides money market funds into three major categories based on an investment of the fund. The three main categories are government, municipal, and prime. Moreover, the SEC further classifies municipal and prime funds as retail or institutional on the basis of the investors in the fund.

Money market funds should be considered by investors who have a short-term time horizon for investment. Investors who need their investments to be extremely liquid, to diversify their portfolio with some conservative investment, and have a low tolerance for volatility should ideally opt for money market funds.  Even the best money market funds do not usually provide returns as high as other types of fixed income funds, such as bond funds; however, money market funds majorly provide stability. Therefore, it is always suggested to have some stable investments as a part of the portfolio. Investors can make use of money market funds in their portfolio to offset the typical high volatility of equity and bond investments.

Some of the advantages of money market funds are stability, security, liquidity, potential tax advantages, and diversification. However, the risk factors associated with money market funds only involves inflation risk and credit risk, making it a safe investment. Below are some of the best money market funds that are great to invest in.

JPMorgan U.S. Government Money Market Fund
JPMorgan offers one of the best money market funds. This fund normally invests its assets particularly in debt securities that are issued or guaranteed by U.S. government agencies. The U.S. Treasury and U.S. government securities fully collateralized repurchase agreements. The dollar-weighted average maturity of the fund is around 60 days or less. Moreover, around 120 days or less is the dollar-weighted average life to maturity of the fund. Securities with floating or variable interests may be invested in significantly as well. The yields keep on changing based on the change in interest rates. Some of the popular holdings of this money market fund are Federal Reserve Bank of New York, Credit Suisse Securities (USA) LLC, Daiwa Capital Markets America Inc., Nomura Securities Co. Ltd., Wells Fargo Securities LLC, Deutsche Bank Securities Inc., and United States Treasury Bill.

Fidelity® Investments Money Market Funds Government Portfolio
Usually, around 99.5% of total assets of the fund is invested in cash of U.S. government securities and/or repurchase agreements that are fully collateralized. This fund invests in U.S. government securities that are issued by entities that are chartered or sponsored by the Congress. However, these securities that are invested are neither issued nor guaranteed by the U.S. Treasury. Around 80% of the assets of this fund are usually invested in U.S. government securities and repurchase agreements of these securities. This money market fund has holdings in Federal Home Loan Bank, U.S. Treasury Bills, Federal Reserve Bank of New York, Freddie Mac, U.S. Treasury Notes, Federal Farm Credit Bank, and many more. Having such powerful holdings makes it one of the best money market funds with net assets of around $106 billion.

Vanguard Prime Money Market Fund
This fund is one of the best money market funds available out there because it aims to provide the highest income while maintaining low liquidity. It has a stable share price of around $1. A variety of commercial papers, ultrashort bonds, CDs, time deposits, and other investments that are cash-like are actively managed and invested in by this fund. The management pays special attention to issues and sectors that appear attractively priced as compared to the peers in the market. This helps them to drive good returns. Cash should always be a part of the portfolio of an investor, no matter what age he or she is, and money market funds like the Vanguard Prime Money Market Fund is one of the popular options they can choose. Some of the top holdings of this fund are the United States Treasury Bill, Payables for Investment Securities Purchased, Federal Home Loan Bank Discount Notes, Federal Home Loan Bank Discount Notes, and Credit Agricole Corporate & Investment Bank.

Goldman Sachs Financial Square Government Fund
This is also one of the best money market funds to choose from. The primary objective of this is that the funds are only invested in government securities. Government securities are the securities that are issued or guaranteed by instrumentalities or government agencies in the country. The net asset value of this fund is around $90.2 billion. The top holdings of the Goldman Sachs Financial Square Government Fund are United States Treasury Notes, US Treasury Bill, HSBC bank, RBCNY, and Federal Home Loan Banks.