Money market funds invests in government securities

LAST WEEK’S QUESTION

Help, what are Money market, equity funds?

Kindly assist me. I am fresh from school and I have been looking for ways to invest whatever little money I have as I wait to get sustainable employment.

I have read a lot on money market funds and equity funds, as well. Is investing in these funds a wise move with little money? Please, explain the difference between the two and how the money grows.

Juddie

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Money market funds and Equity funds are products of unit trusts. Unit trusts are collective investment schemes that allow individual investors to pool their money into a single fund, thus spreading their risk across a range of investments, getting the benefit of professional fund management, and reducing their dealing costs.

The fund managers are people responsible for investing pooled funds, implementing the unit trust’s investment strategy and managing the day-to-day portfolio trading. 

A money market fund invests in government securities such as treasury bills and treasury bonds, corporate bonds, commercial paper, and fixed deposits.

Its purpose is to provide investors with a safe vehicle to pump easily accessible cash-equivalent assets known as low-risk investments, that is, investment fund that holds the objective to earn interest for investor while maintaining the principle value deposited by the investor.

Here, the investor gains by way of earning interest on the money he/she has invested in the fund.

The advantages of money market funds include; their low risks since the monies are invested in securities which have a fixed and secured rate of interest.

The investor is also assured of the principle sum plus interest at any given time.

In Kenya, money market funds have a structure that is regulated by the Capital Markets Authority (CMA) ensuring that all monies are professionally managed and the interest of the investor comes first.

Winnie Macharia
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