8 Benefits of Growing your Cash the SMART Way as a New Investor June 20, 2024

Embarking on your investment journey can be both exciting and daunting. With the plethora of investment products and services out there, it’s essential to find a starting point that balances risk, accessibility, and potential returns. Money Market Funds (MMFs) are an excellent choice if you are new to investing, as their benefits align well with the needs and concerns of beginners. Here are 8 benefits highlighting why MMFs are a good investment option for novice investors:

1. Safety and Stability

One of the primary concerns a new Investor might have is the safety of their principal investment. MMFs invest in short-term, high-quality securities such as Treasury bills, certificates of deposit, and commercial paper issued by stable, financially sound companies. These investments are generally low-risk and provide a high level of capital preservation. The stability of MMFs makes them a safe starting point, giving new investors the confidence they need as they navigate the world of investing.

2. Liquidity and Accessibility

MMFs offer high liquidity, allowing you to access your funds quickly and conveniently. This is particularly important as you might need the flexibility to withdraw your money without facing penalties. The ability to convert investments into cash almost immediately provides a sense of financial security and flexibility, which is essential if you are just starting out.

3. Modest Returns with Low Risk

While MMFs don’t offer the high returns associated with stocks or long-term bonds, they do provide better returns than traditional methods of saving money. Earning a modest interest on your money while keeping risk low is an attractive proposition. This balance allows you to steadily grow your funds without the stress of significant market volatility.

4. Diversification

MMFs invest in a diversified portfolio of short-term instruments. This diversification helps spread risk and reduces the impact of any single investment’s poor performance. Diversification is a key strategy to learn and adopt, as it lays the groundwork for more sophisticated investment portfolios in the future.

5. Professional Management

Another advantage of MMFs is that they are managed by experienced financial professionals. These experts select and monitor the fund’s investments, ensuring that the portfolio remains balanced and aligned with its goals. Having professional management provides investors peace of mind given the level of expertise that is invaluable in the early stages of investing.

6. Low Minimum Investment Requirements

Many MMFs have low minimum investment requirements, making them accessible to a wide range of investors. This is particularly beneficial for beginners who may not have a substantial amount of money to invest initially. Starting with a low minimum investment allows you to begin building your portfolio without feeling financially strained.

7. Convenience and Flexibility

MMFs often offer additional conveniences, such as the ease of transferring funds to other accounts. This flexibility is advantageous for managing everyday cash needs and provides a practical way to transition between saving and investing. This ease of use makes the investing process more approachable and less intimidating.

8. Building Financial Discipline

Investing in MMFs helps to inculcate financial discipline. By regularly contributing to your fund, you can establish a habit of saving and investing, which is crucial for long-term financial success. Over time, this disciplined approach can lead to more significant investments and a well-rounded portfolio.

Conclusion

For those just starting out on your investment journey, MMFs offer a blend of safety, stability, and modest returns, making them an ideal investment. The high liquidity, professional management, and low minimum investment requirements provide a secure and accessible way for beginners to dip their toes into the investing waters. As you become more comfortable and knowledgeable, you can gradually diversify into other investment options, using the foundation built with MMFs to guide your decisions. By starting with MMFs, you can gain confidence and experience, setting the stage for a successful and rewarding investment journey.

Grow with Phillip Money Market Fund in SMART Park

Here at Phillip Securities, we have our very own Phillip Money Market Fund (PMMF), which aims to preserve principal value and maintain a high degree of liquidity while producing returns comparable to that of Singapore Dollar savings deposits. PMMF invests primarily in short term, high quality money market instruments and debt securities. Such investments may include government and corporate bonds, commercial bills and deposits with financial institutions.

Investing in PMMF is easy. You can simply open an Account with a SMART Park facility. SMART Park is an Excess Funds Management Facility that invests and manages your idle cash automatically, on a discretionary basis into PMMF. You will enjoy benefits such as high liquidity, low minimum investment, and more, all while having all-in-one access to your money within your investment account. This provides the added advantage of easily deploying your money for other investments as needed.

Find out more about SMART Park here and start investing the SMART way today!