Are you trying to find a short-term investment that offers better returns than a typical savings account? One excellent choice is money market funds. It’s ideal for investors who like to maintain the liquidity of their funds and have a low to moderate risk tolerance.
We shall discuss a money market fund’s definition, operation, and advantages and disadvantages in this post. Additionally, we’ll quickly go over a list of money market funds you can look at so you can start investing right away.
What is a Money market fund?
A section of the financial market called the money market is where financial instruments with short (6–12 month) maturities and significant liquidity are exchanged. On the other hand, a money market fund is a kind of mutual fund that makes investments in low-risk, short-term debt instruments.
The maturity period for this kind of fund is only six months to a year. Because of its enormous liquidity, it is regarded as one of the safest and least dangerous investment options accessible.
What are some illustrations of money market funds?
Money market funds are typically used by investors for low-risk positions in a portfolio. Investments are made in highly liquid, short-term debt instruments, such as certificates of deposit, commercial paper, and government and money market securities (treasury bills, treasury bonds, etc.
Are money market accounts and money market funds the same thing?
A money market account, also known as a money market deposit account, pays interest on the current money market interest rates. On the other hand, money market funds are mutual funds that place investor money in money market instruments.
Are money market funds and accounts interchangeable terms?
A money market account, often called a money market deposit account, pays interest in line with the going rate on the money market. Money market mutual funds, on the other hand, invest investor money in money market securities.
Basic Features of Money Market Funds in the Philippines
- Initial investment, often known as the required sum to open a money market fund.
- Additional investment, or the sum you wish to increase to your investment, which, depending on your money, may range from PHP 25 to at least PHP 100,000.
- Every time you make a new investment, you are charged a sales load.
- Trust fees are often charged at a rate of.05% to 1% to cover operating, managerial, or administrative costs.
- The holding period is the time frame throughout which you must maintain your investment in a money market fund.
- When you redeem your investment before the end of your holdout term, an exit fee is calculated.
Who is permitted to invest in money market funds?
Investors that want low-risk, short-term investments and have a moderate appetite for risk are the best candidates. This might be a good investment if you’re seeking safe, highly liquid investments with somewhat greater yields than savings accounts or time deposits.
Please read: DIGITAL MONEY: CRYPTOCURRENCY USAGE
How do you subscribe to a money market fund?
You can invest in money market funds with the assistance of several banks, UITFs, insurance providers, and mutual fund firms. By doing this, a qualified group of fund managers will look after your investment and make timely decisions to expand and diversify your investment portfolio.
To purchase money market funds, you can use a cheque or an Internet transfer. You will also need to fill out forms as a new investor, including the client suitability assessment form, the risk disclosure statement, and the UITF participating trust agreement, to name just a few.
List of Philippine Money Market Funds
These companies provide money market funds that are suitable for any budget.
- Sun Life Prosperity Money Market Fund
- Land Bank Money Market Fund
- China Bank Money Market Fund
- Rizal Peso Money Market Fund
- BPI Invest Money Market Fund
- Metro Money Market Fund
- BDO Peso Money Market Fund
- PNB Prime Peso Money Market Fund
- SB Money Market Fund
- CTBC Money Market Fund
What drawbacks do money market funds have?
Any investment still entails some risk, however small. Unlike savings accounts or time deposits, money market funds are not covered by the Philippine Deposit Insurance Commission.
When all the fees are taken into account, they might not even pay out more than savings accounts or time deposits. This can be a difficulty for people who wish to invest but don’t have the necessary amount because some banks or mutual fund firms have a high initial investment requirement for money transfers.
What benefits do money market funds offer?
An excellent substitute for a bank savings account is a money market fund. They quickly generate passive income while keeping your money in a secure location.
Because they mature in just 6 to 12 months, they are less risky for your short-term financial goals. Additionally, they are quite liquid, allowing you to swiftly and easily turn your investment into cash.
Conclusion
Before purchasing a money market fund, just as with other investments, you should think about your financial goals and current situation. How much danger are you willing to accept to increase your savings? Asking yourself whether you won’t need this money in the next six to twelve months will help you determine whether this form of investment is good for you.
Find out what is an appropriate money market placement for you by conducting your study on the finest money market funds in the Philippines. Pick a business that has a solid reputation for security and stability. It won’t hurt if they also offer first-rate customer care to address all of your questions about money market funds.
