Money Market Fund

Dear Mr Tan

Please explain what's the difference between the Money Market Fund and ordinary shares. I have to buy at bid price which is very much like buying share from the market.

How is the yield (of about 3%) calculated? Some good shares provide higher yields.

Fixed deposit rate is too low. I wish to look for other investments that allow me to get easy access to my money.

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REPLY:

The money market fund is invested in money market investments, such as short term bonds and certificates of deposits. These investments currently yield about 3% per annum, and are usually for durations of less than 1 year.

When you invest in the money market, you buy units at its unit price (or net asset value). The unit price changes everyday according to the value of its underlying investments.

If you measure change in the unit price over a few weeks, you will probably find that the annualised yield is about 3% per annum. This yield may change according to the underlying investments.

The manager of the fund will take a small charge (usually less than 0.5% per annum) from the fund. Hence, you will get the net yield.

For the money market fund managed by NTUC Income, the annual charge is 0.25% per annum. There is no transaction cost or sales charge when you buy or sell the units.