Read Time: 3.5 minutes
Typical Malaysians only save their excess cash in savings accounts and fixed deposits. But very few know about money market funds (MMF).
Ever since I learned about MMF and its benefits, I never look back to fixed deposits again.
MMF is a secret that banks and fund managers do not want you to know. It is because these firms earn peanut profits from MMF, it’s not even worth their time.
What are Money Market Funds (MMF)
A money market fund is a type of mutual fund that invests in short-term cash equivalent instruments such as commercial papers and fixed deposits.
Commercial paper is an unsecured, short-term debt product used by banks to borrow money from buyers. It is one way for banks to increase their cash balance in a short time. In return, they promise you a fixed rate of interest.
Fixed deposit is another debt product by banks, which promises you a return by locking up your money. Then they will use this cash to loan to others and make profits with interest.
The Pros & Cons of Investing in MMF
If we were to compare money market funds with fixed deposits, here are the pros & cons of investing in MMF:
- Low risk
- Higher returns
- No locked-up period like FD
- Return is not fixed
- Not insured by PIDM
The Pros of MMF
By investing in MMF, you are basically lending money to banks. Since these instruments are supported by banks, they are considered low risk due to short-term and high liquidity.
High Liquidity means it is easy to convert an asset to cash without sacrificing its market price.
Since MMF has a large amount of money (a few hundred million Ringgit), it gives them the privilege to negotiate for a better rate than the typical fixed deposit rate.
With that large amount of money, MMF usually invests in several fixed deposits with different time frames. This allows it to regularly harvest matured fixed deposits at different times, hence we can withdraw our money anytime without sacrificing the return.
The Cons of MMF
Just like any other mutual fund, the return of MMF is never fixed. However, MMF’s return is still easily predictable compared to bonds and stocks.
As fixed deposits are provided by banks, they are usually insured by PIDM.
PIDM protects your fixed deposit up to RM250k when the bank becomes bankrupt.
For MMF, although it is considered a low-risk investment, it is not insured by PIDM.
How to Invest in MMF
There are many ways to invest in MMF, but I will only list 3 simple ways to invest in it.
- Versa Cash
When the Versa app was launched, it started as a platform for users to invest in Money Market Funds. Now it offers other types of investments as well.
Currently, it offers up to 4% return, until the end of June 2023.
To invest in Versa Cash:
- Download and install the Versa app.
- During registration, use “AL9JZJ9H” as your referral code to get free RM10
- Deposit your money into Versa Cash or Cash-i (Shariah-compliant)
- And you’re done!
For more details, you may follow this guide by Versa: How to Onboard, Deposit and Withdraw
- StashAway Simple
StashAway is the first robo-advisor app that offers an MMF account (known as StashAway Simple) for normal citizens like us to invest in.
I first learned about MMF thanks to StashAway Simple. Currently, it is offering up to 4.1% return, so far the highest among its competitors.
To invest in StashAway Simple:
- Download and install the StashAway app.
- Deposit your money into StashAway Simple.
- And you’re done!
Note: StashAway Simple is not Shariah-compliant.
- TnG Go+ & GoInvest
I bet many of you are familiar with TnG e-Wallet, but you may not realize that MMF is behind these accounts that generate good returns for your money.
By topping up your money to TnG e-Wallet, you can earn daily interest if you agree and enable automatic transfer to TnG Go+.
There is another fund called GoInvest, which gives a higher return than Go+ and has no maximum limit.
Below show the differences between Go+ and GoInvest:
To invest in TnG Go+ or GOInvest:
- Download the TnG e-Wallet app.
- Deposit your money into e-Wallet and enable auto-deposit to Go+ (Deposit via credit card is not transferable to Go+)
- To invest in GOInvest, tap on GO+, tap the banner below and tap “Cash In” as shown below.
There are other MMF that I did not mention such as KDI Save and Wahed. You can go explore them if you’re interested.
However, I don’t recommend investing your money all over the place. I always prefer a simple way to manage my money, and I don’t like managing multiple platforms all at once.
That’s all for this week’s newsletter. I hope you learn something from it.
Talk with you again next week.
Your Money Buddy,
Whenever you’re ready, there are 2 ways I can help you:
1) Book a 1:1 Call Session with me if you want to pick my brain, be it finance or any topic you would like to learn from me.
2) If you’re not sure which platform to invest your money, here are 3 platforms that I personally use:
→ Rakuten Trade – The only brokerage account I’m currently using now to invest in US index funds and Malaysian stocks. Get RM30 worth of RT points if you register & unlock foreign trading with my referral link.
→ Wahed Invest – The robo-advisor I use to invest in Shariah-compliant US Stocks, mainly HLAL ETF. Get free RM10 if you register a new account with my referral code “markeo1”