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Monetary Fund

Edit: Financial 360 finishing Source: Fusion 360 Date: 2014-03-24

Summary:

A money fund is an open-ended fund that collects idle funds from the society, runs the fund manager's operations, and the fund custodian keeps funds.
Monetary FundIt is an open-ended fund that gathers social idle funds and then pays fund managers to operate and fund custodians keep funds. Monetary funds are mainly invested in short-term currency instruments with high safety margins and stable returns, such as government bonds, central bank bills, commercial paper, bank certificates of deposit, and government short-term bonds.
Different from other types of open-end funds, money funds are characterized by high security, high liquidity, stable profitability, and "quasi-savings". Money-money fund gains and losses will fluctuate due to fluctuations in the investment market. Generally, they will receive higher returns than bank deposit interest. However, money funds do not guarantee the security of the principal.

★Product Features
 
1. Principal security: The investment risk of most money market funds determines that it is the lowest risk among various types of funds. Currency fund contracts generally do not guarantee the security of the principal, but in fact, due to the nature of the fund, it determines the currency funds. In reality, principal losses rarely occur. In general, money funds are seen as cash equivalents.
2. Strong capital flow: Liquidity can be comparable to current deposits. The fund is easy to buy and sell, the time for capital arrival is short, and liquidity is very high. General fund redemption of funds for one or two days can arrive. At present, fund companies have started instant redemption of money funds, and they can arrive on the same day.
3. Higher yields: Most money market funds generally have the level of return on Treasury investment. In addition to investing in investment vehicles such as exchange repurchases that can be invested by general institutions, money market funds can also invest in the interbank bond and repurchase markets and the central bank bill market. The annual net rate of return can generally be fixed for one year. For the comparison of interest rates, the annual returns are shown in the table below, which is higher than the level of bank savings during the same period. Not only that, money market funds can also avoid hidden losses. When inflation occurs, the real interest rate may be very low or even negative. Money market funds can grasp interest rate changes and inflation trends in time to obtain stable and higher returns.
4. Low investment costs: Trading of currency market funds generally exempts handling fees, subscription fees, subscription fees, and redemption fees are all zero. Funds are easily accessible, reducing investment costs and ensuring liquidity. The first subscription/subscription of 1,000 yuan, and the purchase of one hundred yuan again.
5. Dividends and tax exemptions: The denomination of most money market funds will always be 1 yuan, and the income will be calculated every day. There will be interest income on a daily basis. Investors will enjoy compound interest while bank deposits will be a single interest. Monthly dividends are transferred to fund shares, and dividends are exempt from income tax.
In addition, the general money market fund can also be converted with other open-end funds of the fund management company, which is efficient, flexible, and low cost. When the stock market is good, it can be turned into a stock fund. When the bond market is good, it can be turned into a bond fund. When the stock market and bond market do not have a good chance, the money market fund is a good safe haven for investors. Grasp the opportunities in the stock market, bond market and currency markets.

★classification
 
The IMF's restrictions on the size of participating funds can be divided into A and B categories. Class A is for small and medium investors, B for institutions and large investors. The minimum subscription limit for Class A currency funds is generally 1,000, and Class B is 5 million. Their sales service rates are also different. For example, the sales service fee rate of Haifutong Currency Class A is 0.25% per annum; and that of Haifutong Currency Class B is 0.01% per annum.
 
Open-end funds
Open-end funds include general open-end funds and special open-end funds. A special open-end fund is LOF. The full English name is “Listed Open-Ended Fund” or “open-end funds”. Chinese is called “listed open-end fund”. That is, after the issuance of a listed open-end fund, investors can purchase and redeem fund shares at designated outlets, and they can also buy and sell the fund on the exchange.
 
Closed-end funds
Close-end funds (close-end funds) refer to the sponsors of funds that limit the total issuance of fund units when they set up funds. After making up the total amount and after necessary approval or filing, the fund is declared to be closed and closed. No longer accept new investments for a certain period of time. The circulation of fund units adopts the method of listing on stock exchanges. Investors who buy and sell fund units in the future must all conduct bid transactions in the secondary market through securities brokers.
 
The difference between the two
1. The variability of fund size is different. After the open-end fund is issued and opened, its fund units are redeemable, and investors can subscribe for fund units at any time, so the size of the fund is not fixed; the size of closed-end funds is fixed.
2. The trading prices of fund units are different. The trading price of fund units of open-end funds is based on the net asset value of the fund units, and there will be no phenomenon of discount or premium. The prices of closed-end fund units are more affected by the market supply and demand relationship, and the price fluctuations are greater.
3. Funds have different ways of buying and selling. Investors of open-end funds may purchase or redeem funds directly from the fund management company at any time, and the fee is relatively low. Closed-end fund trading is similar to stock trading. It can be bought and sold on the stock market, requiring handling fees and securities transaction taxes. In general, the cost is higher than open-end funds.
4. Different investment strategies. Open-end funds must retain a portion of the funds so that investors can redeem at any time, and long-term investments will be subject to certain restrictions. Closed-end funds are not redeemable and do not need to withdraw reserves. They can make full use of funds to make long-term investments and achieve long-term business performance.
5. The required market conditions are different. The flexibility of open-end funds is relatively large, and the scale of funds is relatively easy to scale. Therefore, it is applicable to financial markets with a relatively high degree of openness and large scale. Closed-end funds, on the other hand, are applicable to the fact that the financial system is not yet complete and has a low degree of openness. Smaller financial markets.

how to choose
 
A look at the scale
The advantages and disadvantages of funds of different sizes are different. If the scale is small, under the environment of falling interest rates in the money market, the continued entry of incremental funds will quickly dilute the investment income of the money funds. Large-scale funds will not have such concerns. In the context of rising interest rates in the money market, smaller funds will shift their boats and the fund's yield will rise rapidly. Based on various factors, investors should choose a moderate-sized and operational currency fund.
 
Second look old and new
The older the money market funds are, the more attractive they are. Old funds generally operate more maturely, have certain investment experience, and hold more high-yield varieties. Choosing a long-term, relatively stable currency fund is a more sensible choice.
 
Three to see A, B
Among the current 51 funds, 40 funds are A-grade funds and 11 funds are B-grade funds. The main difference between the two is the investment threshold. The starting amount of a general A-class fund is 1,000 yuan, and the amount of B-class investment is More than one million yuan. From the perspective of earnings, B-level earnings are higher than A-level, but the threshold is too high, and ordinary investors are still suitable to choose A-level funds.
 
Four to see the product line
When stock prices are not good, investors can use money funds to safely evade investment risks. When stock market investment opportunities come, they can use future fund conversion functions to increase investment returns. Therefore, it is advisable to choose a well-established fund company product line.
Investors should try to choose a relatively large-scale, long-term excellent currency fund to invest, because the larger the scale, the greater the space for fund operation and maneuvering, which is more conducive to investment operations and better control of liquidity risk. As of the end of the first quarter of this year, the fourth-term Taurus currency fund, the Harvest Fund, has a scale of more than 10 billion yuan, 5.7 times the average size of the currency fund, and 7.6% of the total size of the money fund. It is not susceptible to large-scale redemption. It is more suitable for buying money funds.

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