It is important for the potential investors to familiarize themselves with what investments are and the various categories of Investments products.
Young people who want to begin their investment journey are often faced with the challenge of choosing the most suitable investment avenue given the various investment options available in the market.
Before beginning the investment journey, it is important for the potential investors to familiarize themselves with what investments are and the various categories of Investments products.
Simply put, an investment is an asset or item acquired with the goal of generating income or appreciation and involves purchasing an asset with the intention that in the near future, the assets will generate income or be sold for a higher price.
Investments can be categorized into two, i.e. Traditional Investment and Alternative Investments. Traditional Investments include Equities, Fixed Income, and Mutual Funds/ Unit Funds, while Alternative Investments include Real Estate, Private Equity, and Exchange Traded Funds (ETFs).
Money Market Funds (MMFs) are a type of Unit Trust Funds (UTFs) that pool funds from different investors and mainly invest in short-term debt instruments such as Treasury Bills and Commercial Papers, and also in Money Market Instruments such as Call and Fixed Deposits.
MMFs are managed by professional Fund Managers who invest the pooled funds in a portfolio of securities with the aim of generating returns in line with the specific fund objectives.
Key to note, the funds and the fund managers are fully regulated by the Capital Markets Authority (CMA). Given the low initial investment amount required in most Money Market Funds and the fact that most youths are just starting off their investment journey, investing in a money market fund provides a good starting point.
Below we look at the advantages Money Market Funds provide to investors;
Given that the youth tend to lean towards liquidity, stability, and security of capital invested, investing in Money Market Funds provides a good entry point in their investment journey.
Money market funds offer a good stepping stone into investments and are key in cultivating an investing culture among the youth who would then expand their horizon and diversify their portfolios into different asset classes over time.
The fund managers verse experience in fund management also ensures that the investors’ funds are invested in a structured and organized manner as opposed to investing in a random fashion.
Therefore, before investing in Money Market Funds, it is important for young people to do their due diligence before picking the specific Money Market Fund to invest in. They should also understand the investment objective of the fund and ensure that it aligns with their financial goals.