money market fund

How to invest in Money Market Funds

Investing can be a daunting experience, especially for first timers. There are so many investment options to choose from that it becomes difficult to decide which the best ones are for specific goals and budgets. However, there are some common investment options that most people are familiar with. If you’re considering investing, then you’ve probably come across the term Money Market Funds. These are one of the most popular investment vehicles available.

Money Market Funds are a type of mutual fund that invests in low risk, short term debt securities. They were launched in the 1970s and rapidly gained popularity thanks to their high degree of safety.

They are ideal for both first timers and experienced investors as they offer lots of perks with low risks. Some of the perks include easy access to funds and low volatility. Additionally, they are a good alternative to traditional bank accounts since they have better interests. They are good to hold emergency funds or accumulate large sums of money for a short term goal.

Once you have invested in a Money Market Fund, a professional fund manager will then invest the money in asset classes known as Money Market Instruments. They include Treasury bills and bonds, short-term corporate debt, fixed deposits and commercial paper.

Currently, some of the top Money Market Funds in Kenya include Cytonn Asset Managers Ltd, Etica Capital Ltd, and Apollo Asset Management Company Ltd. They attract good yields and have low investment amounts. Here’s a guide on how to invest in MMFs.

  1. Choose a fund

Once you’ve familiarized yourself with the different MMFs available, you need to choose the one that suits your needs and goals. There are many options to choose from in the Kenyan market so it shouldn’t be difficult to find that one that is most ideal for you. You can also consult with a financial expert to help you make the right choice.

  1. Open an account

You need to have an account with the fund management company for you to start investing. Most institutions offer online application services through their website. You can also apply physically at the institution’s office. Some documents required for the application include a copy of your ID or passport, 3 months’ bank statements and a copy of your KRA PIN.

  1. Make a deposit

The next step is to deposit money into the account. This is the money that will be used to invest in an MMF. Most institutions have a minimum investment amount of Ksh 1,000 but some have as low as Ksh 100. Ensure that you deposit enough money to meet the minimum requirement. You can make the deposit through a bank transfer or mobile money.

  1. Provide investment instructions

Instructions help the fund manager to understand how you want to invest your money. It could be how frequent you want to make your contributions or whether you want to reinvest your returns automatically. Ensure you provide clear instructions to avoid ambiguity or confusion.

  1. Monitor your account

MMFs are relatively stable so you don’t have to worry about fluctuations. However, it’s still necessary to keep an eye on your account to see whether you can make any adjustments to be able to reach your goals. You can access your account online or enable periodic updates from the institution.

  1. Withdraw your investment

One of the benefits of a MMF is that you can redeem your investment within a short period and without any penalties. Whether you’ve reached your goals or experienced an emergency, you can make a withdrawal within a few days to meet your needs.