It is a good alternative for investors who are looking for a stable, low-risk instrument with potentially higher returns than banks' savings deposits. Such funds often have no sales charge, although they come with a low management fee of about 0.5 per cent per year.
A money market fund invests in high-quality short-term instruments and debt securities.
Why is it important?
You can use it to park money that you want to keep safe and available for spending in as short a time as a few months to as long as several years.
Still, not all money market funds are the same. When shopping for a money market fund, read the fund's prospectus and annual reports. Check to see what kinds of debt instruments the fund invests in.
So you want to use the term? Just say...
My financial adviser thinks that I should be more prudent and put some savings in a money market fund, as it has low risks and generates returns that usually beat bank rates.
This article was first published in The Straits Times on 13 July 2008.
