Saving Money in Money Market Fund

In the past when we wanted to save money safely, we would think about savings deposit which is convenient and transaction that can be made at all times. Alternatively, fixed account generates higher interest rate than savings account but there’re more limitations and conditions.

When interest rate of both savings and fixed deposit account reach at their low level, depositors may allocate some money to invest in other channels but at similar risk level which is “Money Market Fund”.

Money Market Fund is very low risk because it has investment policy for deposit money. Bonds that have less than 1 year expiry date are suitable for short-term investment that needs liquidity management and higher returns than savings deposit with no loss of principal. More importantly, there’s no need to pay personal income tax.

When Money Market Fund is low risk, returns will be accordingly low. Therefore, if we understand and accept this condition, we’ll be in safe zone while investment market is unpredictable. Anyway, an investment with investment policy in short-term bonds, will have higher risk level than deposit money. Thus, we’d better consider the following factors before making decision on investment.



1.     Security

The most important reason for savings deposit is safety as money kept in the bank will be guaranteed by Deposit Protection Agency (DPA) such as, deposit at 1 MB level will be protected and money is returned within 30 days in case the Finance Institutions shut down. So, you can ensure that you’ll never lose your deposit.

Even though Money Market Fund is not guaranteed by DPA, it’s considered highly safe. Although the fund has investment policy in short-term bonds but most are government bonds with low risk. However, there’s a chance to receive higher average returns than deposit money in the bank.

2.  Operation Fee

The fee will be charged for savings deposit in the bank such as, debit card and ATM but that fee will generate more convenience. Besides, when receiving returns from interest rate, 15% withholding tax will be deducted (in case interest gained are over 20,000 Baht per year; if less than that, tax will be exempted).

While for Money Market Fund, major fee is expense for fund management at low level.

3. Returns

The returns of Money Market Fund have fallen since the beginning of COVID-19 pandemic. The 1-year average returns are close to deposit interest rate. Before jumping into investment, you should also consider its returns and compare risk.

4. Liquidity

There’s no investment that has as high liquidity as savings deposit. However, the liquidity of Money Market Fund is in good level so it has become an interesting choice for money break. If you need to spend money, you must sell the fund 1 day beforehand and you’ll get money back by next official day.

Tips to choose investment in Money Market Fund

1. Returns rate: Choose fund that offers good and consistent returns, better than other fund of the same type, and better than Benchmark, by comparing with interest rate of Fixed Deposit Account among 3 big banks averagely.

2. Type of investment instruments: Investment policy will determine returns and risk. If there’re lots of investment policy in instruments issued by financial institutions and private sectors, there’ll be a chance to get high returns, but risk is higher than Mutual Fund invested in Government bonds.

3. Allocate investments to several types of instruments in order to reduce risk: For example, Government bond, Financial Institution bond or Loan stock, and also consider bond duration and its high credit rating.

4. Expense: Choose Mutual Fund that costs lower expense when comparing with Mutual Fund with the same characteristic and investment policy.

5. Convenient transaction: Choose Mutual Fund that has affiliates, investment agents such as, bank branches or online trading platforms to facilitate variety of trading channels.

Source: The Stock Exchange of Thailand

It’s clearly seen that investment in Money Market Fund is a kind of saving money that generates better interest than general savings deposit account if you know how to choose Mutual Fund that offers better returns rate. On top of that, it’s low risk. And most importantly, there’s no tax payment required in case of an ordinary person.