Most Kenyans invest their disp[osable income in banks as opposed to Money Market Funds (MMFs). Although most of them are skeptical of MMFs because they do not understand how it works, others do not know the advantages that come with MMFs over banks.
Below are some of the advantages of investing money in MMFs.
Higher yields
Money market funds typically offer higher yields than traditional savings accounts offered by banks. This is because money market funds invest in short-term debt securities, such as Treasury bills and commercial paper, which often offer higher returns than bank deposits.
Read: Cytonn Money Market Fund Returns Highest Yields
Liquidity
Money market funds are highly liquid, meaning that investors can easily convert their investments into cash. This is useful for investors who may need to access their funds quickly, especially those who need cash on a regular basis.
Diversification
Money market funds offer investors the opportunity to diversify their portfolios by investing in a range of short-term debt securities. This can reduce the risk of investing in a single security or bank.
Professional management
Money market funds are managed by professional fund managers who use their expertise to select high-quality investments and manage the fund’s portfolio. As such, the managers have the responsibility of choosing the most profitable areas of investments and with low risk.
Regulation
Money market funds are regulated by the Capital Markets Authority (CMA), which has the responsibility of licensing fund managers. The CMA also monitors other anomalies in the management of Money Market Funds, such as fraud or poor management.
Read: Vibrant Capital Markets Are An Important Cog For Economic Growth
Tax advantages
Money market funds are tax-efficient and offer tax advantages to investors. They are taxed at a lower rate than bank deposits and other savings accounts.
Despite the many advantages of money market funds, investors need to be very careful when choosing where to invest their money. They should do due diligence by seeking to ascertain the licensing status of a fund manager before making an investment decision.
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