Money Market Funds (MMFs) have emerged to be among some of the top investment avenues for thousands of Kenyans over banks.
However, the biggest challenge comes when budding investors struggle to choose an investment platform and how much money they could earn from their investments.
In this piece, Kenyans.co.ke gives you an overview of what to look for when deciding to invest in an MMF.
Focus on What You Take Home
What matters most in MMF is the net yield—the amount you earn after all fees and taxes are removed. When investing in the funds, do not just look at the big return numbers on the various advertisements.
For instance, if a fund may say that it pays 16 per cent, it is important to look at what the net yield is because you might end up receiving much less after deductions.
Compare Returns Across Different Funds
An investment tip, according to experts, is to consider comparing the returns that different MMF platforms offer. Some MMFs have recently been giving net returns of 14 per cent or more, while others offer around 9 to 10 per cent, but more consistently.
Comparing these net rates will help you choose the one that gives you the best deal.
Watch Out Hidden Charges
Every MMF takes a small cut in the form of management and trustee fees. These fees are the reason why two funds with the same gross return might give you different net returns.
Always read the fund’s factsheet or ask your financial provider how much they charge before investing.
Minimum Amounts and Easy Access
While some funds require big amounts of money to join, like between Ksh100,000 and Ksh1 million, others let you join with as little as Ksh1,000 or even Ksh500. This is an important consideration so that you do not stall or postpone your investment journey.
Additionally, check how easy it is to withdraw your money in case of an emergency. Naturally, a fund with fast access and low entry is ideal for most people. Most of the MMFs often give you between 24 to 72 hours to access your funds.
Pick Consistency Over Flashy Numbers
Some funds look great one month, then drop the next. It is better to go with one that performs well regularly, even if the return is slightly lower. Check if the fund has done well over the last year or more.
Having More Than One
You do not have to stick with one fund, you can try investing in two different MMFs. This way, you can enjoy the benefits of both. By doing this, experts advise that you can get to see which one gives a better return and access.
In summary, do not just throw your money in MMFs. Take your time to compare the net yields, fees, and access terms. With the right choice, you could earn more than 10 per cent per year on your savings, without risking your capital.
