To be sure, do not equate this type of mutual funds to conventional mutual funds. Money market funds do have some differences with the conventional mutual funds. This kind of mutual fund does not mean a mutual fund that place assets in various currencies fundamentalist or a variety of foreign exchange business. In contrast, money market funds are a mutual fund that puts all of the assets of investors in money market instruments. Then, what is called money market instruments? Money market instruments are securities with maturities of less than a year, for example, bank certificates, deposits, or bonds with maturities of less than one year.
With maturities of less than one year, automatically this money market fund is more liquid than regular mutual fund. This type is very suitable for novice investors, who are still attached to investing in deposits, but want to try investing in mutual funds. Although this fund has an interest that is not much different from the deposit, this type of mutual fund still has more advantages.
First, the withdrawal time is very flexible. As I mentioned above, this type of mutual funds have high liquidity. This is very different from the deposit; investors can liquidate their funds only if it is due. If investors want to withdraw their money in bank deposit product before its maturity, investors will be subject to a penalty. The amount could reach more than 10% of interest.
Second, investors can determine the amount of money want disbursed. Meanwhile, on deposit, investors cannot determine its own amount of money to withdraw. Inevitably, investors must be willing to withdraw all his money on deposit plus the entire yield.
The other advantage of money market funds is the profit. The profit that is higher than bank deposits. This is because this type of mutual fund usually put most of funds in the short-term bonds. Well, this kind of bonds, in addition to having higher interest than deposits, the mutual fund also has capital gains from the secondary market, although not so significant.
After describing some of the advantages of money market funds, there is no harm if you are just beginning to switch profile-from bank deposit investor to mutual fund investor- try this type. But I suggest, if indeed you already have an adequate understanding of world capital markets, invest your funds in instruments that have higher capital gains even though the risk is also definitely will be higher (remember, High Profit, High Risk). To be sure, for a better personal financial planning, avoid investment in uniform, prioritizing your funds diversified into several different instruments.
Happy investing :)
{ 0 comments... read them below or add one }
Post a Comment