The money fund is a fund that invests in money market instruments. These types of financial instruments are mainly short-term credit instruments issued by the government, banks and industrial and commercial enterprises. Due to high credit, strong liquidity and low risk, money funds have the characteristics of “quasi-savings”.
The high degree of security makes the rate of return of currency funds not too high compared with general financial products. The annualized income is generally 2%-3%, and sometimes slightly higher than 3%, but more than 4% is almost impossible. is unlikely.
The biggest competitiveness of money funds is that they have liquidity close to demand deposits, while the income level is much higher than the interest rate of bank demand deposits.
In terms of comprehensive profitability and liquidity, money funds can be said to be a financial product with relatively high returns and cost-effectiveness.
The Advantages of Money Funds
Highly Secure Investment Principal
Although the monetary fund contract does not guarantee that the principal will not suffer losses, due to the high security of the fund’s investment objects, it is determined that the money fund rarely loses the principal.
Strong Capital Flow
Currency funds are easy to buy and sell, and T+0 operations can be realized. The operation is convenient, the funds arrive in the account in a short time, and the flexibility is similar to that of savings.
Stable Income
The return of money funds is less volatile, and generally has a return rate similar to that of treasury bonds. Moreover, the income of the currency fund is calculated on a daily basis, and income is generated every day.
Lower Transaction Costs
When investors buy currency funds, subscription fees and redemption fees are not charged. Although there are sales service fees, management fees, and hosting fees, these fees are very low.
Low Investment Threshold
Monetary funds do not have high requirements for capital and investment experience, and some monetary funds do not have minimum investment restrictions.
How to Choose a Money Fund?
Safety
In all investments, safety should be the primary consideration.
Many people invest in currency funds because of their convenience. The security of currency funds largely depends on whether the currency funds can be realized at any time, which is a liquidity issue.
In terms of liquidity, we can pay attention to the redemption time of currency funds. (Basically, the share can be confirmed on T+1 day)
The redemption time should be fast enough to prove that the fund has sufficient liquidity. The redemption time of some funds takes T+1 day, or even T+2 day.
Profitability
Most of the current money fund annualized returns are in the range of 2%-4%. If the annualized interest rate is too high, then you should pay attention, after all, the benefits and risks are proportional.
Size and Strength
Funds with strong backgrounds tend to get higher negotiated rates at banks and are more comfortable to trade.
When choosing a money fund, the strength of the fund company and the establishment time of the fund are often considered factors. After all, the fund that has been standing for a long time has always been tested by the market.
Transaction Cost
Although the transaction costs of currency funds are relatively low financial products, there are always differences between different currency funds. Choosing a fund with lower fees will reduce the loss of funds during the trading process.
Summary
Monetary funds are a low-risk financial management tool, with strong liquidity and relatively high interest rates.
From the perspective of family financial management, appropriate allocation of monetary funds can help reduce the overall investment risk level of the family, meet the needs of the scientific allocation of family assets, and achieve the purpose of stable appreciation of funds.
Of course, how much to configure and how to configure it also needs to be combined with the specific situation of the individual.
