Many Kenyans don't know how to get the best out of Money Market Funds.
Here's a guide on how you can level up your money game with this important asset classππ
Time for a Threadπ§΅
Here's a guide on how you can level up your money game with this important asset classππ
Time for a Threadπ§΅
Before we get started if you don't understand how Money Market Funds work,
Go through these two threads below before you continue with the rest of this thread.ππ
Go through these two threads below before you continue with the rest of this thread.ππ
<<Continuation>>
Getting the best out Money Market Funds
The different ways you can use Money Market Funds:
1/ Stack your emergency fund
Getting the best out Money Market Funds
The different ways you can use Money Market Funds:
1/ Stack your emergency fund
For most MMFs, you can access your money within 2 days.
For some you can instantly access your money.
That's why it's an ideal avenue to stack your emergency fund.
Because you can easily access your money anytime you need it.
For some you can instantly access your money.
That's why it's an ideal avenue to stack your emergency fund.
Because you can easily access your money anytime you need it.
2/ Stack your sinking fund
A sinking fund is where you save money intended for expenses that will occur in the near future.
E.g. - Holiday
- School fees
Saving for such expenses in a MMF will allow you to access your money when you need it and also earn some interest
A sinking fund is where you save money intended for expenses that will occur in the near future.
E.g. - Holiday
- School fees
Saving for such expenses in a MMF will allow you to access your money when you need it and also earn some interest
3/ Entry into bigger investments.
If you are planning to start a business or raise capital to enter into an asset class like real estate,
MMFs will help you accumulate your savings while earning some interest on top of it.
If you are planning to start a business or raise capital to enter into an asset class like real estate,
MMFs will help you accumulate your savings while earning some interest on top of it.
4/ The liquidity part of your portfolio.
Investors perish when they lack liquidity.
To avoid that, you want to have a portion of your money in an asset class that you can easily cash out in case you need the cash.
MMFs, will help you build the liquid part of your portfolio
Investors perish when they lack liquidity.
To avoid that, you want to have a portion of your money in an asset class that you can easily cash out in case you need the cash.
MMFs, will help you build the liquid part of your portfolio
5/ Cash part of your portfolio.
If you can instantly access your money from your MMF account like you do with a bank account,
Then you can keep part of your cash in the MMF account.
If you can instantly access your money from your MMF account like you do with a bank account,
Then you can keep part of your cash in the MMF account.
6/ Don't keep money in your banks' savings or fixed deposit account.
A savings' account or a fixed deposit account isn't an investment.
You are earning very low returns while the bank is lending the same money at very high interest rates.
Move this money into your MMF account.
A savings' account or a fixed deposit account isn't an investment.
You are earning very low returns while the bank is lending the same money at very high interest rates.
Move this money into your MMF account.
As you can see, MMFs are the basic investing accounts.
So how do you separate your funds to meet all these purposes?
Have multiple accounts with different firms.
You can have accounts with the following categories.
So how do you separate your funds to meet all these purposes?
Have multiple accounts with different firms.
You can have accounts with the following categories.
1/ MMF A - For your emergency fund.
This is where you stack your emergency fund.
This is money that can meet your normal expenses for a period of at least 3 months.
This is where you stack your emergency fund.
This is money that can meet your normal expenses for a period of at least 3 months.
2/ MMF B - For your sinking fund
This is where you save money to meet your short term expenses.
These include:
- Holiday
- School fees
- Wedding
This is where you save money to meet your short term expenses.
These include:
- Holiday
- School fees
- Wedding
3/ MMF C - Entry into other bigger investments.
This is where you save money for:
- Your business expansion,
- Entry into a bigger investment like real estate
- To invest in other asset classes like the stock market
or Treasury bills
- To start a business
This is where you save money for:
- Your business expansion,
- Entry into a bigger investment like real estate
- To invest in other asset classes like the stock market
or Treasury bills
- To start a business
N.B.
You don't have to necessarily have the 3 accounts.
It depends with how big your savings are and what needs you have.
You don't have to necessarily have the 3 accounts.
It depends with how big your savings are and what needs you have.
How do you know which MMFs companies to go for?
The most important factors when it comes to MMFs are:
1/ Management fees. Go for the ones with low management fees.
As an investors, investing costs aren't your friend.
The lowest in the Kenyan market is 0.9% & the highest 2.5%
The most important factors when it comes to MMFs are:
1/ Management fees. Go for the ones with low management fees.
As an investors, investing costs aren't your friend.
The lowest in the Kenyan market is 0.9% & the highest 2.5%
2/ Ease of access of your money
How fast can you access your money in case you need it?
Can you access your money instantly or do you have to wait for two days?
3/ Don't forget regulation by CMA
How fast can you access your money in case you need it?
Can you access your money instantly or do you have to wait for two days?
3/ Don't forget regulation by CMA
Final Notes on MMFs:
MMFs aren't get rich quick scams. Your money will earn a net return of about 7-9% annually.
Don't expect much from MMFs.
They are only good investment options for the short term(less than 3 yrs)
MMFs aren't get rich quick scams. Your money will earn a net return of about 7-9% annually.
Don't expect much from MMFs.
They are only good investment options for the short term(less than 3 yrs)
If you will be making small deposits, be keen on the transaction charges.
More so when using Mpesa paybills, the cost of transacting may be higher than the return you will be getting at the end of every month.
If possible do inter bank transfers or use Pesalink.
More so when using Mpesa paybills, the cost of transacting may be higher than the return you will be getting at the end of every month.
If possible do inter bank transfers or use Pesalink.
That's it on MMFs.
If you loved this thread:
1. Follow me @kahome_steve for more amazing threads.
2. Retweet the first tweet in this thread so that other people may see it.
If you loved this thread:
1. Follow me @kahome_steve for more amazing threads.
2. Retweet the first tweet in this thread so that other people may see it.
P.S.
If you would like to learn more about MMFs, Money Management and how to get started with investing,
Register for my July Masterclass as guided by the details in the poster below.
If you are wondering what you will get by attending, see this thread
If you would like to learn more about MMFs, Money Management and how to get started with investing,
Register for my July Masterclass as guided by the details in the poster below.
If you are wondering what you will get by attending, see this thread
Here's the registration details. In case you need any clarifications, DM
And if you would like to learn more about about MMFs, SACCOs, and T-bonds
This e-book has you covered. Get it via this link or DM for Mpesa option.
gichukikahome.gumroad.com
This e-book has you covered. Get it via this link or DM for Mpesa option.
gichukikahome.gumroad.com
TL;DR
MMFs can serve the following purposes:
1/ Sinking fund
2/ Emergency Fund
3/ Liquid part of your portfolio
4/ Replace bank saving account
5/ Entry into bigger investments
6/ Cash part of your portfolio
MMFs can serve the following purposes:
1/ Sinking fund
2/ Emergency Fund
3/ Liquid part of your portfolio
4/ Replace bank saving account
5/ Entry into bigger investments
6/ Cash part of your portfolio
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