THREAD:
MONEY MARKET FUNDS (MMFs)
What are Money Market Funds?
Pros and Cons of Money Market Funds
What are the best Money Market Funds in Kenya?
Let's find out below👇👇
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MONEY MARKET FUNDS (MMFs)
What are Money Market Funds?
Pros and Cons of Money Market Funds
What are the best Money Market Funds in Kenya?
Let's find out below👇👇
Retweet and share widely!
A Money Market Fund is a low risk investment mutual fund that invests in highly liquid, short term instruments.
In Kenya, MMFs are regulated by the Capital Markets Authority (CMA).
There are over 20 MMFs in Kenya that are regulated by the CMA.
In Kenya, MMFs are regulated by the Capital Markets Authority (CMA).
There are over 20 MMFs in Kenya that are regulated by the CMA.
Money Market funds pool money from investors and invest in highly liquid short term investments.
These include:
- Treasury bonds
- Treasury bills
- Cash equivalent securities
The interest rate varies day to day depending on the market conditions.
These include:
- Treasury bonds
- Treasury bills
- Cash equivalent securities
The interest rate varies day to day depending on the market conditions.
Pros of Investing in a MMF
1/ Highly liquid.
You can access your money within 2- 5 days.
2/ Very low risk.
You can hardly lose your money in a MMF. You never lose your capital.
MMFs are almost risk-free.
MMFs invest in cash equivalents that have very low risk.
1/ Highly liquid.
You can access your money within 2- 5 days.
2/ Very low risk.
You can hardly lose your money in a MMF. You never lose your capital.
MMFs are almost risk-free.
MMFs invest in cash equivalents that have very low risk.
3/ Little capital is required to get started.
Some MMFs require as little as Ksh 100 to get started.
The average initial investment lies between 1,000- 5,000
MMFs allow you to invest in areas like treasury bills and bonds that you wouldn't otherwise invest as an individual.
Some MMFs require as little as Ksh 100 to get started.
The average initial investment lies between 1,000- 5,000
MMFs allow you to invest in areas like treasury bills and bonds that you wouldn't otherwise invest as an individual.
4/ Better returns than bank accounts.
MMFs have average annual return rates of around 7-10 %.
Have higher return rates than banks' saving accounts.
A hedge against inflation as they beat inflation rates.
MMFs have average annual return rates of around 7-10 %.
Have higher return rates than banks' saving accounts.
A hedge against inflation as they beat inflation rates.
Why do investors prefer Money Market Funds?
1/ Ideal avenue to stack your emergency fund.
2/ Ideal avenue to accumulate your savings for a bigger investment like real estate, buying land or entry into the stock market.
1/ Ideal avenue to stack your emergency fund.
2/ Ideal avenue to accumulate your savings for a bigger investment like real estate, buying land or entry into the stock market.
3/ Ideal avenue to stack cash intended to meet your short term goals like:
- Wedding plans
- Holiday plans
- School fees
- Wedding plans
- Holiday plans
- School fees
Factors to consider when choosing which MMF to invest with.
1/ Regulation
MMFs are regulated by the Capital Markets Authority (CMA).
Ensure the MMF you are investing in is regulated by CMA.
Beware of scammers who may want to steal your hard earned money.
1/ Regulation
MMFs are regulated by the Capital Markets Authority (CMA).
Ensure the MMF you are investing in is regulated by CMA.
Beware of scammers who may want to steal your hard earned money.
2/ Performance Record.
How has the fund performed in the last 5-10 yrs?
Have they been consistent with their returns?
How does the returns of the fund compare with other MMFs and the market average?
How has the fund performed in the last 5-10 yrs?
Have they been consistent with their returns?
How does the returns of the fund compare with other MMFs and the market average?
3/ Average annual return rates.
Be cautious of MMFs that have higher average annual return rates than their peers or the market average.
They may be using more aggressive strategies that may put your money at risk.
High return rates may mean high risk.
Be cautious of MMFs that have higher average annual return rates than their peers or the market average.
They may be using more aggressive strategies that may put your money at risk.
High return rates may mean high risk.
4/ Investment costs.
MMFs charge fees like management fees and withdrawal fees.
Many funds may not openly disclose the fees they charge you. Make sure you find out.
Investment costs are not your friend. They will shrink your returns.
MMFs charge fees like management fees and withdrawal fees.
Many funds may not openly disclose the fees they charge you. Make sure you find out.
Investment costs are not your friend. They will shrink your returns.
Go for MMFs that charge lower fees.
Notably, with many MMFs:
- Management fee is usually 2% of the invested amount.
- Withdrawal falls btn 1-1.5% of the invested amount.
Notably, with many MMFs:
- Management fee is usually 2% of the invested amount.
- Withdrawal falls btn 1-1.5% of the invested amount.
5/ Ease of Access.
How easily can you access your money?
On average, you can get your money within 2-5 business days.
Some MMFs allow you to access certain amounts of money within 24 hrs.
Some MMFs even allow deposits & withdrawals via Mpesa.
How easily can you access your money?
On average, you can get your money within 2-5 business days.
Some MMFs allow you to access certain amounts of money within 24 hrs.
Some MMFs even allow deposits & withdrawals via Mpesa.
6/ Where do they invest their money?
Look at their portfolios. Are they investing their money in high risky investments?
If they are, they are likely to lose your money as they pursue higher return rates.
Look at their portfolios. Are they investing their money in high risky investments?
If they are, they are likely to lose your money as they pursue higher return rates.
How do you join a MMF?
First, do your research and compare different MMFs and pick one that works for you according to your interests and preferences.
You only need to fill the application form(most of them are online & you can find them on their websites)
First, do your research and compare different MMFs and pick one that works for you according to your interests and preferences.
You only need to fill the application form(most of them are online & you can find them on their websites)
Requirements:
- Be at least 18 yrs of age
- National ID or Passport
- KRA pin
- Bank account details
- Be at least 18 yrs of age
- National ID or Passport
- KRA pin
- Bank account details
CONS of MMFs
There is only one.
MMFs are not suitable for long-term investments like retirement planning because they do not offer much capital appreciation.
They are ideal for short term- investments.
Preferably not more than 3 yrs.
There is only one.
MMFs are not suitable for long-term investments like retirement planning because they do not offer much capital appreciation.
They are ideal for short term- investments.
Preferably not more than 3 yrs.
FINAL NOTES:
- You can lose your money in a MMF if the fund is mismanaged.
- Interest earned from MMFs in Kenya is charged 15% withholding tax.
- You can lose your money in a MMF if the fund is mismanaged.
- Interest earned from MMFs in Kenya is charged 15% withholding tax.
That's it on Money Market Funds.
If you found this thread useful:
1/ Follow me @kahome_steve for more threads.
2/ Retweet the first thread so that other people may see it.
@cheruiyotkb @mtucreativity @MwangoCapital @Theo_mwangi @AAndashe
If you found this thread useful:
1/ Follow me @kahome_steve for more threads.
2/ Retweet the first thread so that other people may see it.
@cheruiyotkb @mtucreativity @MwangoCapital @Theo_mwangi @AAndashe
P.S
If you would love to learn more about how to manage your personal finances, budgeting and investing basics,
I just published an e-book for you.
This is your go to financial literacy guide book.
Get it at your own price in the link below.👇
If you would love to learn more about how to manage your personal finances, budgeting and investing basics,
I just published an e-book for you.
This is your go to financial literacy guide book.
Get it at your own price in the link below.👇
For those who can't access the e-book via the link, DM
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