The Ultimate Guide to Money Market Funds- Best MMFs by AUM

The Ultimate Guide to Money Market Funds-  Best MMFs by AUM

As you probably know by now, it’s extremely difficult to keep money in your current account and not use it. One of the financial instruments that you can use to both keep your money from being swiped away by your debit card while still earning interest are money market funds.

Before we get to that, let’s quickly highlight the different investment ideas that generate a higher interest rate compared to savings accounts;

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Money market funds just happen to be one of our favorite investment options at Africa’s Pocket. They are great for a few reasons:

  1. I have access to my money almost as quickly as if it was in my bank account. Within 3 or 4 days, I can access any money that I put into a MMF
  2. They are a safe haven for my money, especially funds that I'm not willing to risk e.g. emergency funds or larger investment opportunities
  3. They earn compound interest! Our best friend in wealth building - I love knowing that my savings are earning interest but are still accessible to me

Over the years, we’ve offered personal finance advice to hundreds of people through our course and in most of these settings, money market funds always come up. As a result, we’ve been receiving a lot of questions about them;

  • “What’s a money market fund?”
  • “How do I invest in one?”
  • “Is it safe for me to invest in one?”
  • “What interest rate should I expect?”

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We’ve compiled the frequently asked questions to create a guide that’ll help you have a better understanding of this investment opportunity. Let’s get to it!

What is a money market fund?

A money market fund (MMF) is an accumulation of money from the public that is then invested in various financial instruments such as commercial papers, t-bills, government bonds, or other higher-risk investments such as stocks and real estate.

In Canada and the US, they are commonly known as money market mutual funds while in the UK they may go by ‘High Yield Savings Accounts.’ Despite their different names, they all operate the same way.

Is it safe to invest in a money market fund?

As far as investing goes, there’s only one risk-free asset; Treasury bills and bonds. These investment options are offered by the government as a way to meet spending on different projects. Treasury bills and bonds are considered risk-free because of the certainty of future returns with virtually no possibility of loss.

Despite not being risk-free, MMFs are generally a safe investment. For one thing, they are licensed and regulated so your investment is mostly protected. It’s however important to note that if the money market fund you chose invests more of its money on higher-risk investments, you’ll either get higher returns (yay!) or lose your capital altogether (dang!).

What’s the average interest rate of this investment?

An investment fund company (owners of the MMF) may choose to invest the fund’s portfolio on different financial instruments. Some companies may choose to invest a large portion of their portfolio on higher-risk investments, while others may choose to invest in safer options. As a result, the interest rates offered by MMFs vary amongst the different options.

Here’s a breakdown of the average interest rate of MMFs in different markets;

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P.S: the interest rates vary amongst the different markets because some currencies are more stable and stronger than the others. Stronger currencies have lower risks of default hence the lower returns (remember high risk = high return and vice versa).

What should I look for when choosing a MMF?

The truth is, you need to conduct a lot of due diligence before settling on a particular fund. We highly recommend calling the particular company and asking as many questions as possible as well as conducting a lot of online research to find out the past performance and the reviews on the fund. Here are a few questions to guide you while conducting your due diligence;

1. What’s the minimum investment and the int rate?

It’s important to start by finding out the minimum amount that you can invest in a particular fund. Different money market funds have different minimum investment opportunities {some may be as low as $10 (KES 1,000) while others may be as high as $10000 (KES 1,000,000)}.

Once you’ve done your research on this, find out the interest rate that they offer - the higher the interest rate, the better, but that may also mean a higher risk of losing your capital. Use the table above to help you identify if the interest rate offered is above or below average).

2. Are there any fees and charges?

Money market funds typically have different fees and charges which include (but not limited to); management fees, processing fees, transaction fees/charges, and certain penalties.

When conducting your due diligence, find out what fees your desired company charges, and make sure that the total amount is less than 2% of the invested amount to avoid limiting your total returns.

3. How long has the company been around and how has the fund performed in the last 5-10 years?

Finding this out is very important in gauging the risk you are about to take up. In most cases (not all), companies that have been around for long (more than 5 years) are safer to invest in compared to new companies.

The past performance of the fund is also important in understanding your risk. If a fund has been consistent over the last 5-10 years, then it would be safer to invest in such a fund compared to a fund where performance fluctuates.

4. What's the money in the fund being invested in?

This is one of the most important things that you need to find out when conducting your research as it addresses your risk appetite. If you are risk-averse (reluctant to take up high risk) then you should consider choosing a MMF that invests most of its money in low-risk financial instruments such as bonds, treasury bills, and fixed deposits. If you don’t mind taking up extra risk, look for a fund that invests most of its money in higher-risk financial instruments such as stocks, currencies, and derivatives.

P.S: If you can’t find this information online, be sure to call the investment fund company to ask for the fund’s portfolio.

5. How easy is it to withdraw your money?

One of the advantages of investing in a money market fund is the fact that this investment option offers liquidity (you are able to easily withdraw your money whenever you need to).

While conducting your research, find out how long it takes to get your money after a withdrawal request. For some, it may be immediately while others may take a couple of days. Figure out what works best for you based on your goals.

How can I use a money market fund?

Now that you have a good understanding of MMFs, here’s our CEO explaining how she uses money market funds;

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Here's a list of the top 10 MMF by Assets Under Management. This is NOT financial advice. Please do your due diligence before giving anyone your money.

Unit Trusts by AUMs - list obtained from CMA 2020 Reports on Unit Trusts

CIC Unit Trust Scheme

Britam Unit Trust Scheme

ICEA Unit Trust Scheme

NCBA Unit Trust Scheme

Old Mutual Unit Trust Scheme

Sanlam Unit Trust Scheme

Dry Associates Unit Trust

Madison Asset Unit Trust Funds

Nabo Capital Ltd

Zimele Unit Trust Scheme

So there you have it, your ultimate guide to Money Market Funds. Are you interested in learning about more investment opportunities? Check out to see what we have to offer you.

Warm regards,

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- For the Africa’s Pocket team 

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