What is a High Yield Money Market?

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  • Written By: Mary McMahon
  • Edited By: O. Wallace
  • Last Modified Date: 25 August 2019
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A high yield money market is a money market mutual fund which promises a high rate of return. Such funds are designed to balance the desire for conservative investment with the need to generate a high rate of return to make investments appealing. Not all companies which offer money market mutual funds, also known as money markets, have high yield options. People can get information about the available options from a staffer or official publication.

Money market mutual funds involve pooling the investments of numerous investors, including both individuals and institutions, to buy low risk securities. The return on investment is relatively low, requiring people to invest in high volume to get a good return, but the tradeoff is that a money market mutual fund is designed to be very safe. People should not, in other words, lose the funds they have invested in a money market; very few money markets have “broken the buck,” as is said in the United States.


For people with limited investment power, a traditional money market is not always the greatest choice, because they will not get a terrific return on their investments. However, people with limited investment power may also have a lot to lose, and thus be reluctant to invest in more high risk funds, out of concern that they might lose their money. These investors may find that a high yield money market meets their needs, and these types of investment accounts are also open to other types of investors.

As with a regular money market, investments in a high yield money market are widely distributed to reduce risk, and relatively low risk investments are chosen, for the most part. However, the fund administrator also chooses some more high yield and slightly high risk investments to put money into, to push the overall return on investment up. This rate of return is generally guaranteed for a set period, with people learning the latest interest rate when they sign up for a high yield money market.

The rate of return can still be lower than with some other kinds of investments, but the reduced risk is viewed as an acceptable tradeoff. Examples of interest rates on high yield money markets vary, depending on the economic climate and the fund doing the administering. Numerous websites compile the latest interest rates being offered by major companies on various types of investment accounts so that people can do some research to find an account which will meet their needs. As a general rule, if the rate of return promised on a high yield money market sounds too good to be true, it is.


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