Money Market Fund

How To Choose A Money Market Fund

Money Market Funds (MMFs) are a type of unit trust. Unit trusts are a type of investment scheme where monies from many investors get pooled. The unit trust manager subsequently invests the aggregated funds.

The organization determining where to invest the monies is known as a unit trust manager. The Capital Markets Authority (CMA) regulates unit trust managers in Kenya. They give guidelines, for example, on the type of places where unit trust managers can invest.

The minimum amount to invest in a Money Market Fund (MMF) is relatively lower than other investment vehicles, for example, treasury bills and bonds. Some Money Market Funds (MMFs) allow investments from as low as Kenya Shillings one hundred. Here are some things you can consider when choosing a Money Market Fund (MMF).


  • Regulation

To protect your money, always work with regulated unit trust managers. You can countercheck the regulatory status of Money Market Fund (MMF) managers on the Capital Markets Authority (CMA) website. Only work with fund managers who appear on the regulator's list.

Also, be on the lookout for any new information about the companies. Opt for organizations with clean reputations. You don't want to lose your hard-earned money to entities that lack integrity.

A decade of existence can be a reasonable timeline for checking the performance of a Money Market Fund (MMF) both return-wise and integrity-wise. Newer players may have higher interest rates but have the disadvantage of a lack of adequate history. Some invest with younger companies and end up facing unprecedented challenges.


  • Goal

Define your goal for investing in a Money Market Fund (MMF). Choose one that aligns with your vision. Goals can vary, for example, depending on where you are on your financial journey.

A common goal we see is looking to invest where the rates of return can outpace the inflation rate. The year 2023 has seen some Money Market Funds (MMFs) give double-digit returns. The rates are higher than the current inflation rate.

Some use Money Market Funds (MMFs) to maintain liquidity. Many use these investment vehicles to store their emergency funds. They work well for urgent situations as you don't have to worry about how fast you can access cash.


  • Individual Characteristics

Look through the offering details of each Money Market Fund (MMF) provider. Choose the one with options that match well with your overall investment goal. Remember, money is finite, so you want to make the best choice among the available opportunities.

The speed of accessing your money can be a Money Market Fund (MMF) characteristic to consider. For example, how fast you can access cash is critical in emergencies. Some Money Market Funds (MMFs) allow withdrawal in hours, while others require you to wait for days.

Convenience is another characteristic that can play a role in the Money Market Fund (MMF) you choose. Some providers have robust digital systems, while others require you to fill in manual paperwork. Such operational issues can affect your customer experience when withdrawing your cash.


Next Steps

The discussion so far is far from comprehensive. Keep abreast of news around investments. With time, you will have a general idea of how the investment market is performing.

Trust your instinct. Work with providers willing to answer all your queries without talking down at you. Choose a Money Market Fund (MMF) when you understand why you are taking the path.

Remember that the final decision is on you. You want to have your money work the hardest for you within whichever Money Market Fund (MMF) you choose with minimal risk of losing it. The more knowledge you accumulate, the better the decision you will make.


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