The money market in Kenya is the next big thing when it comes to investing. If you choose to invest in a money market fund, you will need to place your money in the best bank or insurance company that guarantees high interest rates. Currently, more than 15 companies have this investment option. What is the money market? What is the profitability of the investment? This article highlights what you need to know about this lucrative investment.
Did you know that a regular savings account normally only pays interest on the smallest balance in a month? Confusing, right? Let’s break it down. Assume you had Sh. 5,000 in your savings account on June 1st, then you deposited Sh. 500,000 and intend to withdraw the amount on July 30th. The amount of interest for the two months is calculated on the initial Ksh. 5,000 and not Ksh. 505,000. This is because the least balance in the two months is Ksh. 5,000.
For this reason, it is advisable to find other more profitable alternatives to keep your money. The best option for such a scenario would be to invest your money in money market funds.
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What is a money market fund?
The term refers to investments whose main objective is to provide investors with a safe place and a means to invest assets equivalent to easily accessible cash. This form of mutual fund is known to be a low return, low risk investment. Besides being very liquid and low risk, the Kenya Money Market Fund may be ideal for those looking for investments with no entry or exit charges to the fund.
Kenya Money Market Fund
If you want to put your cash in money market funds, you may want to consider checking out this list of companies with the best money market funds.
CIC Money Market Fund
This one is considered the best to date. This low risk fund focuses on investing in interest bearing instruments that are diversified near cash. Yields include interest earned on term deposits, cash equivalents, and other reliable, interest-bearing investments. The minimum amount you are allowed to invest is Sh. 5,000 and a minimum additional Sh. 1,000 amount.
Madison Asset Money Market Fund
This is a perfect savings account for those looking to grow their savings or hold onto their cash for a short period of time. At the end of the month, the interest earned will be credited and then reinvested while your principal remains safe. You will need to pay an initial investment of Ksh. 50,000.
UK Money Market Fund
This can be considered the most economical in the Kenyan market, as you will need to submit at least Sh. 1,000. The fund invests primarily in commercial paper, treasury bonds, government treasury bills and bank deposits with a profile with a maturity of less than 12 months. Notably, the company has a mobile platform that makes it easy for new and current investors.
Old Mutual Money Market Fund
The fund only focuses on money market instruments which are distributed among reputable institutions. The fund has a static price of Ksh. 1, and the returns change daily, which translates into the portion of daily interest earned by the asset purchased. Notably, the fund also has a minimum investment of Ksh. 1,000.
ABC Money Market Fund
This fund allows a minimum investment of Ksh. 5,000 and an additional investment of a similar amount. You will not be required to pay a membership fee, but you will be charged an annual service fee of 2%.
Kenya Money Market Rate
Money market rates in Kenya are very favorable to investors. Over the past two years, some money market funds have consistently offered better rates than 90-day Treasuries. In addition, these earnings are calculated on a daily basis, Monday through Friday. Daily rates are then published in newspapers.
To open an account, most money market funds require investors to submit at least Ksh. 10,000. Thereafter, however, you will be allowed to withdraw any amount you wish and the remaining balance will still earn interest. The interest rate charged runs at about 8.2 percent per year, before tax. Since interest is compounded monthly, the amount you invest will earn interest in addition to interest on a monthly basis.
With these many advantages, it will be ideal if you keep your money in this form of investment. Most people invest in less profitable savings plans and accounts because they don’t have the relevant information. But now that you understand how money market funds work, it would be worth a try.