Money Market Fund is a type of mutual fund that invests in short-term Treasuries and other money market instruments. This means you can exchange these short term investments for cash whenever you need it. They offer better yields because of their short term and low risk nature.
Why you need to invest in MMFs
- High liquid rate where you can access your money within 2-5 days without having to sign the most of documents
- The Money Market Funds have a low risk and you can be assured that you’ll ever lose your money in MMFs. It’s risk free and they invest in cash equivalents with low risk too
- You don’t have to start big. Some MMFs have a starting capital of as low as Ksh 100 to get started with an average investment of Ksh 1000-5000 as an average. They allow you to invest in treasury bills and bonds, areas you can’t invest as an individual
- Short term achievements. Money Market Funds are short term and can be used to achieve short term goals such as saving for a vacation, wedding and even school fees. Its important that your savings hold their value as you plan for these goals
- Money Market Funds have an average annual return rates of up to around 7-10%. This means they are a better investment than saving your money sitting in the bank and additional, they can save you from inflation of currency
Before you join a Money Market Fund, you need to research and compare different funds to ensure you pick the one that works for you according to interest and preference. This will give you better returns without having to struggle
Consideration before joining a Money Market Fund
- Regulation- MMFs are regulated by Capital Marketers Authority and you should ensure that any MMF you are investing in is regulated by this body to avoid scammers
- Performance is essential. You should check how the fund has performed over time, how consistent they are and their record against other MMFs
- Investment costs. All MMFs charge costs. These are fees like management fees, withdrawal fees and all that. Ensure the costs are friendly to avoid wasting your funds on them
- How easily you can access your money. The purpose of MMFs is to get access to your money when you need it. Check the ease of access before you settle of an MMF. Some can even allow you to access your cash within 24 hours.
You need to also look at their portfolio to check where they invest their money to avoid high risk investment that will in turn lead to your loss of investment.