Friday, August 31, 2007

Money market Fund

Q1. Money market fund (pertaining to Flexi cash) is a type of unit trust. If I buy at 100 units at an offer price of $1.10, my total investment is $1,100. If I decide to sell it at a bid price is $1.09, my proceeds will be $1,090. So I have make a loss of capital of $10. That means a person have to time his withdrawal to make sure that his capital is preserved.

Reply: It is possible, but unlikely, for the money market fund to drop in value. Even if it does drop (due to a rise in interest rate), the drop is temporary and it will recover its value in a few days or weeks time.

Q2. Can the bid price drops for a money market fund? So does that mean that one should buy when the offer price is low?

Reply: If you look at the price over the past few months, you will find it it increases by 0.1 cents very 5 to 15 days. If you time it, you may save a few days of interest.

Q3. In Singapore, the money market fund is packaged as unit trust. The value of the unit is determine by the bid/offer price?

Reply: You are right.

1 comment:

Loh Hon Chun said...

In the long run, we should see the world progress.. It's impossible to see us one day sitting on rickshaws.

Regards
Loh Hon Chun

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