Some money market funds provide tax-exempt income and preserving capital. A money market fund's primary investment objective is to earn interest and maintain a net asset value (NAV) of $1 per share. Three tax-exempt money market funds that may be worth considering are the Vanguard Tax-Exempt Money Market Fund ("VMSXX"), T. Rowe Price Tax-Exempt Money Fund ("PTEXX") and Fidelity Tax-Exempt Money Market Fund ("FMOXX").

Vanguard Tax-Exempt Money Market Fund (VMSXX)

The Vanguard Tax-Exempt Money Market Fund is a low-risk, low-reward investment that is suitable for high-net-worth investors. The fund aims to provide income that is exempt from federal personal income taxes, while maintaining liquidity and NAV of $1 per share. The fund invests primarily in a multitude of high-quality, short-term municipal securities. Additionally, the fund invests in securities that have effective maturities of 397 days or less, weighted average life of 120 days or less and a weighted average maturity of 60 days or less. Investing in the fund required a minimum initial investment of $3,000 and an annual net expense ratio of 0.07%, as of May 20, 2016.

The fund had 834 holdings and total net assets of $16.2 billion. The fund's portfolio had an average maturity of 27 days and a weighted average life of 37 days, which indicate that the fund carries a low degree of interest rate risk. The fund has an average annual return of 3.08% since its inception date on June 10, 1980. Over the past five years, the fund has generated an average annual return of 0.03%, while its category of tax-exempt money market funds had an average annual return of 0.01% over the same period.

T. Rowe Price Tax-Exempt Money Fund (PTEXX)

The T. Rowe Price Tax-Exempt Money Fund seeks to provide income that is exempt from federal income taxes, while preserving liquidity and capital. To achieve its investment objective, the fund invests primarily in high quality U.S. dollar-denominated municipal securities. The fund invests in securities with remaining maturities of 397 days or less, weighted average maturity of 60 days or less and weighted average life of 120 days or less. To invest in the fund, a minimum investment of $2,500 and an annual net expense ratio of 0.07% are required.

The fund had total net assets of $638.9 million and 199 holdings. The fund's portfolio has a weighted average maturity of 35.70 days and weighted average life of 35.90 days. As of March 31, 2016, the fund had an average annual return of 0.01% over the past five years, which is in line with the Vanguard Tax-Exempt Money Market funds' average over the same period.

Fidelity Tax-Exempt Money Market Fund (FMOXX)

The Fidelity Tax-Exempt Money Market Fund seeks to maintain liquidity and capital while providing income that is exempt from federal income taxes. The fund aims to achieve its investment objective by investing its total net assets primarily in municipal money market securities. Under normal market conditions, the fund invests at least 80% of its total net assets in securities whose interest is exempt from federal personal income tax.

As of 2015, the fund charged an annual net expense ratio of 0.06% and required a minimum investment of $5,000. The share class had total net assets of $6.3 billion. As of May 19, 2016, the fund had a weighted average maturity of 30 days and a weighted average life of 32 days.

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