Money Market

These funds invest in low-risk but highly liquid investments, such as short-term debentures, short-term money market instruments, and placements in short-term deposits. In general, money market funds tend to carry the lowest risk. You will usually be spared from unpleasant “surprises” when you invest in money market funds, but do not expect high returns either. In the long run, returns from money market funds may not be able to catch up with erosion in value of the investment or capital due to inflation.

UNIT TRUST - MONEY MARKET FUND
UNIT TRUST – MONEY MARKET FUND

Money market funds are unit trust funds that invest only in highly liquid short-term money market instruments that essentially deposit (loans) in the form of cash or cash equivalent, as well as short-term Malaysia Government Securities (MGS).

As such, it offers stable income returns at very low levels of risk as they are backed by financial institutions with deep pockets.

Money market funds as an alternative to fixed deposits as lock-in periods for the latter are definitely not consumer-friendly given the low-interest rates.

“Whereas in Money market funds, consumers now have a platform where they enjoy fixed deposit-like rates on their hard-earned cash, with no lock-in period, no additional fees, and most importantly next business day withdrawals, ” he added.

For Money market funds, the risk is controlled, he said, noting that Versa’s funds are 100% invested into fixed deposits, hence making it one of the lowest risk mutual funds available.

Teoh said: “ Money market funds are a good tool specifically to earn a yield on your idle cash, or as an alternative low-risk product to fixed deposits without lock-in periods. Money market funds are suitable for users who do not like volatility which is again ideal for cash management.

On the international scene, he said a number of technology players have been very successful in democratizing Money market funds to the masses. One instance is Ant Financial’s Yu’e Bao, which is currently one of the world’s largest money market funds.

MMF-DETAILS

Makes short-term investments (usually less than 365 days), meant to temporarily “park” the liquid funds while waiting for other opportunities to invest or to sit out a volatile market.
Aims to provide easy liquidity, preservation of capital and moderate income for conservative investors.
These funds generally invest in short-term instruments such as treasury bills, certificates of deposits, commercial papers and inter-bank call money market* *inter-bank call money market: A short-term money market, which allows for large financial institutions, such as banks, mutual funds and corporations to borrow and lend money at interbank rates. The loans in the call money market are very short, usually lasting no longer than a week and are often used to help banks meet reserve requirements.
Ideal as a means to place surplus funds for short periods. There is no service charge nor redemption cost applicable.
Returns on these funds fluctuate depending upon the prevailing interest rates in the market.
Fixed Deposit Rate
Inflation Rate Malaysia
Money Market Rate
Calculating Inflation – An Example
Calculating Inflation – An Example

Inflation is taxation without legislation.

By, Milton Friedman

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