When building our cash reserves whether for an emergency or other financial goals, many of us tend to only look at fixed deposits, a regular savings account or even under our beds to keep our hard-earned cash.     

But have you ever considered money market funds (MMFs) as a way to store your cash?

MMFs are perhaps one of the industry’s best open secrets that is popularly used by corporates and high-net worth individuals to grow their surplus cash without locking up the funds. However, many of us have probably not heard of MMFs because it is not commonly marketed to retail investors. 

In this article, we’ll help breakdown what MMFs are and why you don’t hear about them more.

The Lowdown on Money Market Funds…

MMFs are unit trust funds that invests only in highly liquid short-term money market instruments that are essentially deposits (loans) to banks in the form of cash or cash equivalent; as well as short-term Malaysia Government Securities (MGS). As such, it offers stable income returns at very low levels of risk because they are backed by financial institutions with deep pockets.

Corporates and businesses often rely on MMFs as a way to maximise returns on their cash reserves to beat interest rates provided by bank deposits. Because they are highly liquid (quick turnaround and high flexibility of withdrawal and placements), business owners rely on MMFs to manage their daily cash flow needs.

There are specific industry reasons why MMFs are not marketed as aggressively as other investment products like equity funds to retail investors. But the main reason is because there is no upfront sales charges, for MMFs as any fees would significantly chip away returns. As such, your banker or unit trust agent are not incentivised to sell you MMFs.

Another reason is MMFs typically have high minimum investment amounts that can reach up to RM10,000 which may be out of reach for many Malaysians.

As such, most of us would typically just park our spare cash in a Fixed Deposit (FD) or a savings account. But either option boils down to a choice between yield or liquidity.

FDs may offer higher yields but come with lock-in periods that restrict liquidity. Savings account are of course highly liquid where you can easily access your own money, but earn negligible interest.

MMFs sits comfortably between the two offering the best of both. By pooling funds from a network of investors that can reach up to billions of ringgit, MMFs have larger economies of scale and a stronger bargaining power to get better rates from banks. These savings are then passed back to the MMF investors.

MMFs are highly liquid too as they are typically composed of underlying deposits and money market instruments with different maturities that allows redemption to take place seamlessly and quickly.

However, they are not traditionally accessible to retail investors for the reasons highlighted above.

Yield Or Liquidity?

  Fixed Deposit Saving Account Money Market Funds
Yield/Returns
  • Higher yield
  • close to zero
  • Provide returns equivalent to FD rates or higher
Liquidity
  • Has lock-in periods which restrict liquidty
  • Highly Liquid
  • highly liquid
Accessibility
  • Available to the mass market
  • minimum investment of RM 1,000
  • Available to the mass market.
  • no minimum
  • Traditionally used by corporates and HNWI
  • minimum investment of RM 10,000

Now You Can Have the Best of Three…

With all the benefits that MMFs have to offer, the team at Versa set out to build a digital cash management platform that would provide more Malaysians simplified access to these instruments to get the best out of their idle cash through higher yields but without sacrificing liquidity. 

Through our partnership with Affin Hwang Asset Management, retail investors are now able to invest in MMFs with a minimum investment amount of just RM100 to earn daily interest on their idle cash.  There’s no need to stress anymore about getting the best FD rates and also worry about how long you need to lock in your money for. Placements and withdrawals can be done anytime, anywhere through our mobile app. 

With Versa’s digital cash management platform, more Malaysians can now tap into these sophisticated cash management solutions that have been traditionally accessible only to corporates and high-net worth investors.  

You don’t have to make a trade-off anymore between yield and liquidity to gain the most from your cash. Versa will be more helpful when you encounter these moments in your life by:

  1. Saving you the trouble of planning how much to store and lock in your FD
  2. Allowing you to take advantage of good buying opportunities. Example
    1. Putting a down payment for your dream property 
    2. Investing in a public listed stock during a downturn
    3. Paying and saving for a holiday with large ticket expenses (air tickets, hotels) leading up to the holiday
  3. Not penalising you with early withdrawal charges and interest lost from breaking your FD during cash emergencies

Find out more about Versa’s digital cash management platform here at https://versa.asia/