Money market funds (MMFs) are investments in short-term, low-risk securities, providing investors with a stable option to save their money and achieve modest returns.
Fund Managers invest in various instruments, such as.
- Government Treasury bills,
- Certificates of deposit (CDs)
- Commercial Papers (short-term corporate debt)
- Highly rated debt-based corporate bonds.
The Capital Markets Authority (CMA) in Kenya oversees the regulation of money market funds. Many MMFs have a set initial investment and subsequent top-ups, with some allowing as low as KSh5,000, Ksh1,000 etc.
Money market funds (MMFs) have gained prominence in Kenya as a preferred investment avenue for individuals and institutions seeking stability and modest returns on their capital. Their diversified portfolio allows investors with insufficient capital to reap the benefits of investments that could be out of their reach. While choosing an MMF ensure that the fund aligns with your saving goals and lifestyle.
It is also vital to note that interest earned from money market funds is subject to withholding tax of 15% which is remitted to the Kenya Revenue Authority (KRA) monthly.
Investors often turn to money market funds as a cash management tool or a short-term parking place for funds that are not immediately needed, such as setting up emergency and sinking funds. These funds offer easy access to the invested capital, allowing investors to redeem their funds quickly.
For maximum returns in an MMF, one should invest consistently and be patient. Before investing in a money market fund, investors should carefully review the fund’s prospectus to understand its investment objectives, fees, and risks. It’s also recommended to consult with a financial advisor to determine if a money market fund aligns with their investment goals and risk tolerance.
Many companies offer MMFs in Kenya, such as insurance institutions, banks, and brokerage firms. It is also essential to consider factors such as credibility, customer service, withdrawal duration, initial deposit, top-up, annual management fee, etc.
Different money market funds offer other value-added services such as customer portals, apps, monthly statements, and savings calculators, to mention a few. Below are some MMFs to consider:
Why Money Market fund
Better interest rates – MMFs savings will likely earn higher returns compared to other instruments with the same risk level. Investors earn attractive returns above what banks’ deposits offer. Additionally, MMFs allow for the reinvestment of interests for members to benefit from compound interests currently as high as 15% per year.
Low-risk investment – MMFs are strongly regulated by Capital Market Authority, chances of losing money are low which gives a peace of mind knowing investors savings are safe.
Easy withdrawal – Ability to access your money quickly. Most MMFs will allow for a certain number of monthly withdrawals.
Low transactional costs – Transactional costs are shared among all investors, which translates to MMFs investors paying nominal fees (Management fee).
Professional fund manager – MMFs grant you access to professional fund managers who are likely to make a more informed research-backed investment decision when diversifying and allocating assets. The experts are licensed and often audited to ensure they are protecting investors’ funds.
Reduces Back Tax- One can save consistently when they have a goal set to achieve at a particular time of the year/period.
Example, Investment of Ksh 50,000 to Ksh 100,000,000 invested for 12 months @15% interest per year net withholding KRA Tax 15%.
By Evah Wamuyu Wachira
For sound placement of your monies please call,
Evah Wamuyu Wachira +254 710173285 –Financial solutions specialist
Evah Wamuyu is a member of St. Paul's Self Help Group