ASSETS MANAGEMENT.
Asset management is the practice of increasing total wealth over time by acquiring, maintaining and trading investments that have the potential to grow in value. Asset management professionals perform this service for others. They may also be called portfolio managers or financial advisors. Asset management has a double-barreled goal: increasing value while mitigating risk. That is, the client’s tolerance for risk is the first question to be posed. A retiree living on the income from a portfolio, or a pension fund administrator overseeing retirement funds, is (or should be) risk-averse. A young person, or any adventurous person, might want to dabble in high-risk investments.
MONEY MARKET.
The money market refers to trading in very short-term debt investments. At the wholesale level, it involves large-volume trades between institutions and traders. At the retail level, it includes money market mutual funds bought by individual investors and money market accounts opened by bank customers. In all of these cases, the money market is characterised by a high degree of safety and relatively low rates of return.
Key takeaways;
- The money market involves the purchase and sale of large volumes of very short-term debt products, such as overnight reserves or commercial paper.
- An individual may invest in the money market by purchasing a money market mutual fund, buying a Treasury bill, or opening a money market account at a bank.
- Money market investments are characterised by safety and liquidity, with money market fund shares targeted at $1.
- Money market accounts offer higher interest rates than a normal savings account, but there are higher account minimums and limits on withdrawals.
Understanding the Money Market
The money market is one of the pillars of the global financial system. It involves overnight swaps of vast amounts of money between government, institutions and individuals. The majority of money market transactions are wholesale transactions that take place between financial institutions and companies.
Institutions that participate in the money market include banks that lend to one another and to large companies in the eurocurrency and time deposit markets; companies that raise money by selling commercial paper into the market, which can be bought by other companies or funds; and investors who purchase bank CDs as a safe place to park money in the short term. Some of those wholesale transactions eventually make their way into the hands of consumers as components of money market mutual funds and other investments.
CMA – What does capital market authority do?
The Capital Markets Authority (CMA) is charged with the prime responsibility of both regulating and developing an orderly, fair and efficient capital markets in Kenya. They’re committed to protecting consumers, enhancing market integrity & investor confidence and promoting competition in the interests of consumers.
It is charged with the prime responsibility of both regulating and developing an orderly, fair and efficient capital markets in Kenya with the view to promoting market integrity and investor confidence. It licenses and supervises all the capital market intermediaries, ensuring proper conduct of all licensed persons and market institutions. Regulating the issuance of the capital market products. Promoting market development through research on new products and institutions.
Advantages of money market fund over Fixed deposit account.
Money market funds invest in highly liquid securities like cash, cash equivalents, and high-rated debt-based securities. Because they only invest in highly rated securities, money market funds offer a high degree of safety. Money market funds also offer investors relatively higher yields and a low to moderate risk than fixed savings/deposits accounts. The interest rates on money market accounts are variable, so they rise or fall with inflation. This is an advantage for them, though they still could be outpaced if prices rise rapidly. The yield on savings accounts is especially low, such that it often falls below the rate of inflation. And with many of them, that interest rate is fixed. Fixed-rate investments are especially vulnerable in inflationary climates when prices and costs rise. Money market funds can be accessed whenever you want.
The most important thing to consider in evaluating a money market fund is the interest rate and credibility of the fund manager. But there are a few other factors to consider, among them:
- Minimum initial deposit (How much do you have to save?)
- Balance-maintenance requirements
- Accessibility tools, like checks or debit cards.
- Number of withdrawals/transactions allowed per month. (How frequently do you need access?)
- What counts as a transaction: ATM withdrawal? Purchase? Electronic transfer?
- How much do you want to earn?
- How much risk can you assume?
- Fees/fines/penalties
Collective Investment schemes.
A collective investment fund (CIF), also known as a collective investment trust (CIT), is a group of pooled accounts held by a bank or trust company. The financial institution groups assets from individuals and organisations to develop a single larger, diversified portfolio.
A Collective Investment Scheme (CIS) is just one of the capital market products available in Kenya that are affordable and recommended for the potential investor of all demographics. They are investment vehicles that pool resources of many small savers, generating a large pool (similar to a chama). The resources are then invested in various assets like shares, bonds, property and treasury bills with the sole purpose of generating high returns while minimising risk through diversification of investments. Furthermore, the investors have no day-to-day control over management of the investment as it is controlled by a fund manager. In return the investor receives shares or units that represent his/her pro rata share of the pool of fund assets.
If you are risk averse or would like to create wealth using a safe approach cognizant of the current macro-economic factors, then this is the product for you. In comparison to other avenues of investing, the majority of the Collective Investment Schemes (CIS) in the market require an initial investment with as little as Ksh100 which is relatively affordable to the common ‘Mwananchi’. This works to the benefit of both the investor and the fund manager in that for an investor; he/she can access investment opportunities which would otherwise be inaccessible due to the size of their initial investment amount, while for the fund manager; he/she can access a wider customer base and ultimately grow their assets under management. Collective investment schemes are investments in which you pool your money with that of other investors and they are managed by experienced fund managers who select a range of assets such as shares, bonds, property shares, cash instruments or even physical property.