Bank on money-market funds

Inflation is steadily rising while bank deposit rates are lagging far behind.

 That means your bank savings are losing their value by the day.

If you can handle a bit of risk, park your cash in money-market funds.

You should get higher returns, even though the idea is the same as putting your money in a bank.

Money-market funds are becoming a popular choice for many savers who are looking for a liquid instrument that gives better returns than a bank account.

Because the funds are mainly invested in bank deposits and short-term debt, the investments remain highly liquid.

When savers need cash, they can sell their unit and receive cash the next day.

Although the profit comes only from capital gains, which is not the same as saving with a bank, which offers a fixed rate, the fund is regarded as a relatively low-risk instrument.

Investors need not be worried about suffering staggering losses.

The fund will quote the net asset value (NAV) daily, after adding the profit it earns each day, with the NAV price moving in tandem.

Bank savings rates today stand at 0.75 per cent with three-month and one-year rates fluctuating between 2-2.5 per cent and 2.375 per cent respectively.

Money-market funds offer a slightly higher average return of 2.5-2.7 per cent and 2.8 per cent, respectively.

For example, the return in the past three months from the money-market funds of Krung Thai Asset Management is 2.62 per cent per year.

Siam City Asset Management offers 2.58 per cent and Siam Commercial Bank provides 2.16 per cent.

Investors can enjoy better returns while also having the freedom to move their money at their discretion.

Fixed-deposit accounts pay the interest only on maturity, and savers also have to pay a 15-per-cent tax on the earned interest.

With money-market funds, the only disadvantage is you are paid the next day after cashing in.

There are many money-market funds offered by different asset-management companies.

The fund is also suitable for people who have not finalised their investment plans.

They can park their money in the fund and reallocate it when they have reached their decisions.

Saving accounts are still important because they are used in many financial services, including the ATM. Therefore, savers should calculate their required daily cash flow and move the surplus amount into other instruments, including money-market funds.

It should help to better balance your savings portfolio.