Investments: Money Market Funds Vs Treasury Bills

By Cytonn Investments / November 27, 2019 | 12:38 pm



Treasury Bills Money

Treasury bills, commonly known as T-bills, are units of debt issued by a Government to the public in order to raise money to support government initiatives. This type of investment is safe because it is backed by the government.

T-bills are easily accessible and have a short predetermined maturity, typically of 91, 182 or 364 days. They are auctioned on a weekly basis in Kenya by the Central Bank of Kenya. The CBK offers T-bills with the minimum amount being Kshs. 100,000. T-bills are generally sold for less than they are worth, which is called discounting.

How does this work? If, for example, you buy a 364-day T-bill worth 300,000 shillings whose interest is 10 percent per annum, you will pay Kshs. 276,876. However, when the bill matures, the government will pay you 300,000 shillings translating to an investor return of Kshs 23,124. T-bills, therefore, enable investors to predict their returns quicker than most other investments.

On the other hand, a money market fund is a low risk and highly liquid saving instrument that falls under Unit Trust Schemes. Essentially, it is a pool of funds from various investors which is used to invest further into short term, high-quality debt instruments, including bank deposits, commercial papers and the T-bills discussed earlier. Interest is computed daily, summed up and credited to the investor’s account monthly.

Owing to the ability of MMFs to invest in various securities having different returns, MMF returns always tend to outperform T-bill returns.

Investing in a money market fund, therefore, is one of the most desirable options to save for a short-term goal such as a honeymoon, vacation or school fees through a fund that is generating higher returns.

Taking immediate action and investing with a money market fund can give you peace of mind because of the flexibility it accords you as an investor, especially its high liquidity and ease of withdrawal at any time usually with no extra charges and high returns. Money market funds are the best place to start when desiring to compound your wealth. Better invest in them early.

Some of the top money market fund providers in Kenya include the Cytonn Money Market Fund (average annual return of 11.0 percent*), Sanlam MMF (average annual return of 10.0 percent*) and Zimele (average annual return of 9.91 percent*) CIC MMF (average annual return of 9.70 percent*).

*The effective annual yield may fluctuate

READ ALSO: 4 Factors that Drive Money Market Yields 







More Articles From This Author







Trending Stories










Other Related Articles










SOKO DIRECTORY & FINANCIAL GUIDE



ARCHIVES

2019
  • January 2019 (256)
  • February 2019 (216)
  • March 2019 (285)
  • April 2019 (254)
  • May 2019 (272)
  • June 2019 (251)
  • July 2019 (339)
  • August 2019 (293)
  • September 2019 (306)
  • October 2019 (314)
  • November 2019 (362)
  • December 2019 (86)
  • 2018
  • January 2018 (291)
  • February 2018 (219)
  • March 2018 (278)
  • April 2018 (225)
  • May 2018 (238)
  • June 2018 (178)
  • July 2018 (257)
  • August 2018 (249)
  • September 2018 (256)
  • October 2018 (287)
  • November 2018 (284)
  • December 2018 (187)
  • 2017
  • January 2017 (183)
  • February 2017 (195)
  • March 2017 (207)
  • April 2017 (104)
  • May 2017 (169)
  • June 2017 (205)
  • July 2017 (190)
  • August 2017 (195)
  • September 2017 (186)
  • October 2017 (235)
  • November 2017 (253)
  • December 2017 (266)
  • 2016
  • January 2016 (165)
  • February 2016 (165)
  • March 2016 (190)
  • April 2016 (143)
  • May 2016 (245)
  • June 2016 (182)
  • July 2016 (271)
  • August 2016 (248)
  • September 2016 (234)
  • October 2016 (191)
  • November 2016 (243)
  • December 2016 (153)
  • 2015
  • January 2015 (1)
  • February 2015 (4)
  • March 2015 (166)
  • April 2015 (108)
  • May 2015 (116)
  • June 2015 (120)
  • July 2015 (148)
  • August 2015 (157)
  • September 2015 (188)
  • October 2015 (169)
  • November 2015 (174)
  • December 2015 (207)
  • 2014
  • March 2014 (2)
  • 2013
  • March 2013 (10)
  • June 2013 (1)
  • 2012
  • March 2012 (7)
  • April 2012 (15)
  • May 2012 (1)
  • July 2012 (1)
  • August 2012 (4)
  • October 2012 (2)
  • November 2012 (2)
  • December 2012 (1)
  • 2011
    2010
    2009
    2008
    2007
    2006
    2005
    2004
    2003
    2002
    2001
    2000
    1999
    1998
    1997
    1996
    1995
    1994
    1993
    1992
    1991
    1990
    1989
    1988
    1987
    1986
    1985
    1984
    1983
    1982
    1981
    1980
    1979
    1978
    1977
    1976
    1975
    1974
    1973
    1972
    1971
    1970
    1969
    1968
    1967
    1966
    1965
    1964
    1963
    1962
    1961
    1960
    1959
    1958
    1957
    1956
    1955
    1954
    1953
    1952
    1951
    1950