A good way to earn an interest rate above bank savings to meet your short term goals is through a money market investment account.
I’ll be helping you through the process of setting up a Money Market account in this article.
Money Market Funds in Nigeria
Money market funds offer baskets of investment instruments considered to be safe to individual investors.
What is a Money Market?
This is a market for trading assets that have high liquidity and very short maturities. But retail investors are not allowed to directly invest in this market.
Cue money market funds…
A typical money market fund gives you exposure to several highly liquid, low-risk investment vehicles like treasury bills, commercial papers, collateralized repurchase agreements and Certificate of Deposits.
Each fund manager specifies what percentage of the money market fund goes to each asset.
How to open a money market fund account
The document required for the whole process is often the same across money market fund managers.
The whole process:
- Go to the website of the fund manager you want to use.
- Download and fill an account opening form. On the form, you’ll see a space to tick whether they should help you re-invest the interest accrued on the fund. You want to check that box to benefit from compound interest.
- Scan your completed form, passport photograph, utility bill and ID card (e.g. National ID, International Passport, Voters Card or Driver’s License).
- For some institutions like StanbicIBTC, you would need to go to their office to submit the form and required documents while Meristem and United Capital Plc’s Invest Now allow you to finish the whole process online.
- For ARM money market fund, you can send your scanned documents and payment receipt to the customer care email address.
These fund managers also allow you to set up a direct debit (automated withdrawals from your bank account every month).
Note: Ensure the address on your utility bill matches the address you put on the form.
- If your document is accepted, you will be sent login details to an online platform. You can manage your money market account from there and redeem your funds whenever you want.
Note: There would be a penalty if you tried to withdraw your money in the first 30 days of any deposit.
Top Mutual fund managers in Nigeria
(1) United Capital Money Market Fund:
Yield as at 06/05/2019: 13.2%
Expense Ratio: 1.6%
Fund Manager: United Capital Asset Management Company.
Minimum Investment: N10, 000
(2) FBN Money Market Fund:
Fund Manager: FBN Asset Management Company.
(3) ARM Money Market Fund:
Yield as at 06/05/2019: 13.1%
Expense Ratio: Not Available
Fund Manager: ARM Asset Management Company.
Minimum Investment: N1,000
(4) Stanbic IBTC Money Market Fund:
Yield as at 06/05/2019: 12.72%
Expense Ratio: Not Available
Fund Manager: Stanbic IBTC Asset Management Company.
Minimum Investment: N5, 000
(5) Coronation Money Market Fund:
Expense Ratio: 0.29%
Fund Manager: Coronation Asset Management Company.
(6) Meristem Money Market Fund:
Yield as at 06/05/2019: 11.71%
Fund Manager: Meristem Wealth Management
(7) AXA Money Market Fund:
Annual Management Fee: 1.25%
Fund Manager: AXA Asset Management Limited.
- It is low risk and flexible.
- Interest payments are quarterly
- Yield is higher than the inflation rate (as at the time of writing)
- You can compound interest
- Possibility of top-up of account automatically
- Exposure to several low-risk assets without the need to pay fees for each of them.
- Management fees are low
- It’s best for short term goals and growing your savings.