If you are looking to invest your money in a relatively secure fund you should take a look at ten of the best money market funds in South Africa. And consider investing in one of them. There are of course many other ways to invest your money and make a profit. But investing in a money market fund is one of the best ways to get a return on your money.
In no particular order the following ten money market funds are some of the best in South Africa:
- Allan Gray Money Market Fund
- RE:CM Money Market Fund
- Nedgroup Investments
- Coronation Money Market Fund
- Standard Bank Money Market Fund
- Old Mutual Money Market Fund
- Community Growth
- PSG Money Market Fund
- Prudential Money Market Fund
- RMB Money Market Fund
You must always ensure that you properly understand any investment that you make before you take the plunge.
What is a money market fund?
A money market fund is an open ended mutual fund that is invested in short term securities. They pay out dividends to the investor.
No more than five percent of a fund should be invested in one particular issuer, except of course government securities.
Market funds aim to maintain a stable value for each share. Making the risk a bit lower than with other types of funds and investments.
However although many people believe that money market funds are risk free, this is not the case. As with most funds and investments there is some risk involved for the investor.
Money market funds provide much needed liquidity to financial intermediaries.
Therefore these funds essentially loan investors’ money to companies or to governments for a period of up to one year. Money market funds offer higher rates as well as higher balances than most savings accounts.
Making them a good place for short term savings as well as storage for emergency funds or assets.
What are the risks of money market funds?
Money market funds are generally low-risk, but they still carry some risks:
- Credit Risk: Issuers of the securities in the fund could default, causing losses.
- Interest Rate Risk: Rising interest rates could lower the fund’s returns.
- Liquidity Risk: During market stress, it might be harder to access your money.
- Inflation Risk: Returns may not keep up with inflation, reducing purchasing power.
- Market Risk: In rare cases, the fund’s value could drop below $1 per share.
- Regulatory Risk: Rule changes could affect how the fund operates.
- Management Risk: Poor decisions by fund managers could hurt performance.
- Though safer than many investments, money market funds aren’t completely risk-free.
Criteria in South Africa
One of the criteria of a good money market fund is that the fund size must be one billion rand or more.
Another criteria is that less than 25 percent must be invested in corporate debt. The better funds will steer clear of low rated and poor quality securities. Lowering the risk of a default.
It is also important to find a company with the lowest possible initial fee and yearly fee.
Other Market Funds in SA
There are, of course, many other great money market funds in South Africa and as the statuses of most money market funds do change. You should check on each fund before making your decision.
It is also important to always try to go with a financial company that is reputable and trustworthy. And that has a large base of happy customers.
You will want to work with a financial manager or advisor who can get you a high return on your money for the lowest possible cost. If you invest in a money market fund that has a higher minimum investment rate, you have a better chance of getting a higher return.
The second highest money market rating is the F1 rating. So you should definitely try to go for a company that will not invest any lower than this rating.
In Conclusion of the Best Money Market Funds
Going for a company that invests in high quality, short term investments rather than poor quality, lower rated securities is always better.
Whatever option you choose, make sure you consider all the pros and cons of each money market fund.
In addition get advice from a financial professional. So that you know you are putting your money in the very best possible fund.