Money Market Fund: Complete Guide to Mutual Funds in Kenya

Money Market Fund

In this article, we have discussed the rise of money market funds and ways to start investing in them.

It is imperative that you start investing in these funds as soon as possible.

This will give you the chance to reap the benefits of these funds and maximize your returns.

Money Market Fund Table of Contents:

  1. What is a Money Market Fund?
  2. Why are money market funds in Vogue Now?
  3. What is the history of money market funds?
  4. What is the idea for investing in a money market fund?
  5. Who should invest in a money market fund?
  6. How does a money market fund works?
  7. What risks come along money market fund investment?
  8. What are the Benefits of Investing in a Money Market Fund?
  9. What are the top 5 money market funds in Kenya
  10. How to Invest in a Money Market Fund
  11. F.A.Q

Money market fund related words used in this article:

  • Mutual fund
  • Investment fund
  • Retirement plan
  • Money-market fund
A beautiful money market fund manager - Money Market Fund
A beautiful money market fund manager

1. What is a Money Market Fund

A Mutual Fund is an investment vehicle that provides investors with short-term returns.

A money market fund typically offers investors a very low-risk investment option.

These funds invest in low-risk instruments like Treasury bills, certificates of deposit, and commercial paper.

Money-market funds can be used to manage short-term cash needs and to provide portfolio diversification.

Investment funds are typically popular for retirement savings because they offer a nice yield in exchange for low fees.

2. Why are money market funds in Vogue Now?

Money market funds are typically used for three primary purposes:

1) As a hedge against inflation –

2) To generate income –

3) To provide liquidity.

Money market funds are in fashion because of their low-cost investments and their relatively easy management.

These features allow people to invest without having to worry about the risks associated with other types of investments, such as stocks or bonds.

3. What is the history of money market funds?

The history of money market funds dates back to the US during the Great Depression when investors were looking for alternative ways to invest in stocks.

Managers of these funds made money by investing in short-term debt securities with low risk.

Mutual funds are typically designed to provide stable returns with fixed income portfolios, Treasury bills, and commercial paper.

They are generally considered very safe investments due to low risk.

Money market funds are not new to the financial markets.

The first money-market fund was created in 1854 when Charles Leland raised $100,000 in Boston with the help of partners like Henry Shaw and John Shaw.

The term “money market fund” is widely used by financial institutions, but it can also refer to any type of investing that utilizes this genre.

In 2008, the US government passed the Emergency Economic Stabilization Act which authorized money market funds as part of its bailout policy for US financial markets.

4. What is the idea of investing in a money market fund?

The idea of investing in this type of fund is simple; you buy shares of the fund with your money and collect interest on these shares for an agreed period of time.

Today, there are many types of money market funds – mutual funds, hedge funds, private equity, etc.

5. Who should invest in a money market fund?

… Anybody who wants to grow their money safely and stress-free

If you’re looking for a safe and cheap way to invest your money, then a money market fund is the best place to start.

A money-market fund allows you to put your savings into a low-risk investment that can provide you with consistent returns, but there are still risks involved with these investments.

Before investing in a money market fund, make sure you understand how it works and what risks come along with this type of investment.

6. How does a money market fund work

Money market funds are typically short-term investment vehicles that invest in high-quality, low-risk assets.

The interest rates on money market funds are typically higher than other investments on the market.

It is a type of mutual fund that invests in Treasury bills, commercial paper, and other highly liquid debt instruments with maturities of less than one year.

These types of investments are considered to be less risky because they represent stable sources of cash that can be accessed quickly when needed.

They are one of the most popular types of investments due to their low risk, steady returns, and ability to provide liquidity.

Money market funds serve as a supplement to other investments and serve many different purposes including short-term savings, investment for retirement, and college funds and stocks for children.

7. What risks come along with money market fund investment?

  • No guarantee your investment will be safe as a savings account

Money market funds are a type of investment that offers a convenient way to invest your money.

These funds have a very high probability of keeping your money safe, but they do not guarantee your investments will be safe.

There is also the possibility that you might lose money if the fund doesn’t perform up to expectations.

  • Rate of return shall not be guaranteed

Most money market funds in Kenya promise a 10% return on investment but due to economic situations, the interest could fall to around 7%, or thereabout.

In such times your profits fall considerably.

  • A Money Market Fund Investment is not a long term thing

Money market funds are usually seen as a safe investment with the potential to provide higher returns.

However, many investors who buy these products do not take into account their length of time, only the rate of return they expect on their investment.

If you’re looking for long-term investment opportunities, then money market funds are not for you.

  • Money market funds do not outperform inflation

Money-market funds are a type of investment that allows you to invest in the short-term and trade your investments like stocks and bonds.

By investing in a money market fund, you can avoid high fees from traditional investments.

However, when compared to inflation rates, these funds have not been outperforming.

8. What are the Benefits of Investing in a Money Market Fund?

Money-market funds are an important part of your financial portfolio.

These funds allow you to get a consistent and reliable return on your investments while keeping your money liquid.

There are many benefits to investing in a money market fund.

A few of the main benefits are that this type of fund is;

-liquid

-safe

-efficient

– no account termination penalty

-you can turn it into a monthly passive income stream

It also has low fees, tax efficiency, and government backing in case the fund goes out of business.

One key benefit is that there is no penalty for withdrawing from an investment before the end date or maturity date because it’s considered liquid.

The money can be withdrawn anytime without any taxation or penalty associated with it since the individual only needs to pay taxes on interest earned after they sell their investment in the money market fund.

What are the Best Features of a Cash Fund?

Features of a money market.

These are the features to look for in a good money market fund:

  • Easy to liquidate your account in case of emergency
  • Guarantees about 10% return on investment every year
  • Low risks to your investment-Lowest initial investment, i.e., a low entry deposit
  • A low or affordable monthly contribution
  • A low account management annual fee
  • Short money withdrawal period ideally within 24 hours
  • At least one free money withdrawal from your account per month

9. What are the top 5 money market funds in Kenya

a) Zimele Money Fund

Zimele Money Market Fund is designed to meet the needs of different types of investors. It offers low risks and high returns, with a 9.56 per year interest rate. Investors can choose their risk-based level depending on their individual needs and goals.

Zimele is a company that offers an innovative way of pooling members’ contributions and investing them in safe high-yielding interest-bearing assets such as Treasury bills, Treasury bonds, and fixed deposits.

Zimele Features:  

  • Entry deposit Ksh. 100
  • The fund has a low monthly minimum deposit of Ksh. 100
  • Annual account management fee 2%
  • To withdraw money from your account 24 hours to 2 days waiting period
  • Very competitive annual interest rates for your investment
  • The safety of your investment is enhanced
  • You can use MPesa to deposit and withdraw funds from your Zimele investment account – paybill number 501101
  • Your earned interest is compounded annually
  • Zimele does not ask for minimum account balance
  • Investment account statement available online

b) CIC Money Market Fund

The CIC Money-Market Fund is a fund that invests in highly liquid near-cash interest-bearing instruments.

It is the fund’s objective to preserve capital and provide income while maintaining liquidity.

This fund is ideal for investors looking to invest in a cash market fund:

  • To preserve their capital with an investment fund
  • In order to earn daily interest on their low-risk investment.
  • To invest in one or less than a year and still grow your money
  • To keep money in a safe place for future projects
  • To stay liquid as you earn high interest at the same time

CIC Features to note:

  • Entry deposit Ksh 5,000
  • Monthly contribution Ksh 1,000
  • To withdraw money from your account 2 – 4 days wait
  • Annual account management fee 2%

CIC Money Market Fund returns:

Expected annual investment return rate 9.24%

Returns are simply cashed interest from the various interest-bearing instruments.

They are credited monthly.

The interest in the fund should be reinvested to maximize return on investment.

This will allow the investment account to grow through compounded gains.

With the market has changed so much in recent years, it is recommended you invest the funds for up to a year.

Interest is credited to your account monthly if you want to redeem it for a cash flow.

If you need a regular cash flow, invest in this opportunity.

When you feel uncertain about an investment’s future performance, you might want to ask a financial planner what is the market’s current interest rate trend and is it good for you.

c) Britam Money Market Fund

This is an investment fund.

It helps people save for different financial goals and milestones, such as a business project, emergency fund, home loan deposit, or school fees, etc.

Britam MMF Features you should know:

  • Annual return on investment is between 8 and 10%
  • Entry deposit Ksh. 1,000-Monthly contribution minimum 1,000
  • To withdraw money from your account 48 hours wait
  • Withdrawal restriction
  • once per month only
  • Account management fee is 2.5% per year
  • Sign up code *778#

d) Sanlam Money Market Fund

Security: The fund seeks capital preservation.

This fund has an efficient setup, so you can get your cash in no time.

The fund also offers quick access, so you can pick up your funds at any time.

We invest in emerging technologies, with strengths in developing new products, adapting to changes quickly, and understanding the latest market trends.

The Fund offers a monthly compounding of interest that is calculated daily and distributed monthly into the client’s account.

The Fund is an ideal investment option for individuals, corporate and joint investors.

The Fund is an ideal investment option for individuals, corporate and joint investors because it offers a variety of options to be invested in the market.

It has various asset allocation options, which means it is suitable for all types of investors.

Sanlam MMF Features:

  • Expected annual return on investment is 10.4%
  • Entry deposit Ksh. 2,500-Minimum monthly deposit Ksh. 1,000
  • Account management fee per year 1.2%
  • To withdraw money from your account 3 days wait
  • One free money withdrawal per month

e) Genghis Capital Money Market Fund

Genghis Capital’s Unit Trust Fund is registered with the Kenyan regulator.

Interest is computed daily and paid out once per month.

Genghis Capital Features:

  • Entry deposit Ksh. 500
  • Minimum monthly contribution Ksh. 500
  • Expected annual return on investment 9.16%
  • To withdraw money from your account 2-4 days wait
  • Account management fee per year 2%

10. How to Invest in a Money Market Fund

Investing in money-market funds is not the most profitable option for most people, but it is a great hedge against unexpected economic events.

A money-market fund provides a low-risk investment that will be with you at all times.

The most important thing about investing in a money market fund is to make sure that you are investing correctly.

How to invest in a money market fund steps:

  1. Open an account with a money market fund of your choice
  2. Make your initial deposit
  3. Make monthly contributions regularly
  4. Don’t make withdrawals unless you have an emergency
  5. Grow the investment to a point where monthly interest is equivalent to your monthly income (or salary)
  6. Turn the investment into a passive income stream that pays you monthly, i.e., cash out or (bank) your earned monthly interest.

F.A.Q

  1. Are money market funds safe in Kenya?

In the United States, money market funds are regulated by the Securities and Exchange Commission.

If a money market fund has a portfolio that comprises 60% stocks and 40% bonds, then the SEC considers it to be a blend fund.

The SEC requires that a retirement planning fund maintain an average net asset value of at least $1 per share.

In other words, if one deposit is redeemed for $1,000 and another deposit is made for $100, then the money market fund must be valued at $1,000.

Money funds are not required to invest in only government securities such as Treasury bills or notes.

They can also invest in corporate securities such as stocks and bonds that carry risk.

This means that it is possible for them to fail or go bankrupt if they do not stay up to date on market trends.

The case of Kenya is an interesting one.

The country has been suffering from a high inflation rate over the years.

This has made money-market funds risky as they need to be managed with caution.

The article highlights the top four top risks that have been experienced by this market in Kenya, which are:

a) The risk of being asset-backed

b) the risk of devaluation

c) the risk of pricing arbitrage opportunities

d) international capital flow risks

The article also highlights how even though there are risks to mutual (investment) funds in Kenyan markets, these funds are still considered safe.

It is because investors can hedge against these risks through interest rates by investing in fixed income instruments or through putting their money into government bonds or sovereign credits.

2. Can you lose money in a money market fund?

…Yes you can…

A money-market fund is a type of investment that pools money from many investors to purchase short-term debt securities.

A fund acts as a bank in the sense that the customer deposits funds and the fund invests them for financial gain.

An investment fund, like any other investment, can lose some or all of its invested capital.

It is important for investors to understand how their money is invested and what risks they are taking when investing in this type of fund.

Conclusion:

It is important to invest in your future Now

Investing your money regularly allows you to save more of your hard-earned money for the future.

This is the perfect opportunity for people who are accumulating wealth to invest their money wisely.

Investing can be a difficult thing. There are many factors to worry about when you invest your hard-earned money, including how much risk you want to take and how much return you want on your investment.

Investing your money is one of the most important parts of financial planning because you can use money investments to generate passive income, build wealth, or create a future for your children.

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By Steve Wanjie

Steve Wanjie is a digital marketing specialist, SEO Expert, expert article writer, blogger, sex educationist, and businessman. He is the founder of Dijito Marketing and Laikipo.com. He works and lives in Nairobi Kenya.

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