What Is A Money Market Fund?

What Is A Money Market Fund (MMF)?

What You Need To Know

  • A Money Market Fund (MMF) is a type of investment involving pooling of funds.
  • The CMA (Capital Markets Authority) regulates the providers of Money Market Funds (MMFs).
  • Some Money Market Fund (MMF) providers allow investments from as little as Kenya Shilling (Ksh) 100.


Many Kenyans are embracing investing in Money Market Funds (MMFs), making it currently the most popular investment product in the class of CISs (Collective Investment Schemes). Other CISs (Collective Investment Schemes) products include Fixed Income Funds, Balanced Funds and Equity Funds. There are 36 approved CISs (Collective Investment Schemes) as per the Capital Markets Authority (CMA) report dated the end of June 2023.


Various fund types make up the CISs (Collective Investment Schemes). The CMA (Capital Markets Authority) report dated the end of June 2023 puts the number at 131 funds. Before investing, take your time to understand what Money Market Funds (MMFs) are.


What Is A Money Market Fund (MMF)?

Money Market Funds are investment products that use the power of pooling resources from various parties to enable investing in financial products that ordinarily require a higher minimum investment amount. A good example is investing in Treasury bills. According to the Central Bank of Kenya (CBK), the least amount for investing in Treasury bills is Ksh 100,000.


Many Kenyans cannot afford such investments, as the average wage bill is way lower than the minimum amount for investing in the Treasury bills. Money Market Funds (MMFs) offer a way of indirectly investing in such products, with some providers allowing investments from as little as Ksh 100. The Money Market Fund (MMF) provider then pools the amounts contributed by various investors and invests it in products that may require substantial minimum investments, like Treasury bills.


Some Kenyans with the minimum amounts for significant investments may prefer Money Market Funds (MMFs) because one can withdraw at any time. Money Market Funds (MMFs) do not have a lock-in period. Treasury Bills and Bonds have a lock-in period.


How Money Market Funds (MMFs) Are Regulated

The Capital Markets Authority (CMA) regulates providers of Money Market Funds (MMFs). According to the CMA (Capital Market Authority) report dated the end of June 2023, there were 36 approved CISs (Collective Investment Schemes). The CMA (Capital Markets Authority) shares guidelines on how providers run the Money Market Funds (MMFs).


Invest through registered providers to reduce the risk of losing your hard-earned money through fraudulent organizations. The CMA (Capital Markets Authority) keeps up-to-date records of registered companies and approved financial products. They also respond quickly through social media.


Use the CMA (Capital Markets Authority) resources for unbiased current information. Confirm claims by providers with their regulator. Due diligence is critical before investing.


How To Decide Whether To Invest In Money Market Funds (MMFs)

Where you are on your financial journey is critical in deciding whether to invest in Money Market Funds (MMFs). At Debt Free Living 254, we encourage their use, for example, for emergency funds. Some Money Market Funds (MMFs) have outperformed inflation.


Defining your financial goals can help determine if Money Market Funds (MMFs) are the right vehicle to take you to where you want to be financially. The investment product is suitable for short-term financial projects. They also work for those who keep adding to their principal investment amount.


Think through the features of the various Money Market Funds (MMFs). Do they align with what you want? Consider features like withdrawal charges, how long it takes to access your money, their digital frameworks, etc.


Related Article - How To Choose A Money Market Fund


Additional Resources on Money Market Funds

You can go through the Capital Markets Authority (CMA) website to find out more about what makes up Money Market Funds (MMFs). The regulator produces periodic reports that detail the performance of various investment products. You can also follow them on Social Media.


Some Money Market Fund (MMF) providers share detailed performance metrics of the investment vehicle as a way of marketing themselves. You can opt to follow such providers on Social Media. You can also go through the websites of individual registered Money Market Fund (MMF) providers to get specifics per organization.


You can opt for a practical, non-biased coaching session from experienced investors. A coach who is actively investing is a good source of current information. Get one who is not working with any provider for an objective outlook.


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