A mutual fund can generate more monthly income than a fixed deposit when its underlying investments earn a higher return than the bank's fixed-deposit rate. Its returns can also be reinvested, allowing compounding to increase future gains. Fixed deposits usually lock your money at a predetermined inRead more
A mutual fund can generate more monthly income than a fixed deposit when its underlying investments earn a higher return than the bank’s fixed-deposit rate.
Its returns can also be reinvested, allowing compounding to increase future gains.
Fixed deposits usually lock your money at a predetermined interest rate for a fixed period.
However, a mutual fund is not automatically better—its returns are variable and can sometimes be lower than a fixed deposit.
A Money Market Mutual Fund (MMF) pools investors’ money and invests it in short-term assets such as Treasury bills, commercial papers and bank deposits. These investments generate interest or income, which contributes to the fund’s return. As the fund earns income, the value of your investment can iRead more
A Money Market Mutual Fund (MMF) pools investors’ money and invests it in short-term assets such as Treasury bills, commercial papers and bank deposits.
These investments generate interest or income, which contributes to the fund’s return.
As the fund earns income, the value of your investment can increase.
When those returns remain invested, they become part of the money generating future returns.
That is how compounding works: your returns begin earning additional returns.
For example, ₦100,000 growing at 10% becomes ₦110,000, then ₦121,000 if the return stays the same.
MMF returns are generally variable, so a quoted rate is not necessarily guaranteed.
The longer you stay invested and keep reinvesting your returns, the more powerful compounding can bec
Why is mutual funds better than fixed deposit?
A mutual fund can generate more monthly income than a fixed deposit when its underlying investments earn a higher return than the bank's fixed-deposit rate. Its returns can also be reinvested, allowing compounding to increase future gains. Fixed deposits usually lock your money at a predetermined inRead more
A mutual fund can generate more monthly income than a fixed deposit when its underlying investments earn a higher return than the bank’s fixed-deposit rate.
See lessIts returns can also be reinvested, allowing compounding to increase future gains.
Fixed deposits usually lock your money at a predetermined interest rate for a fixed period.
However, a mutual fund is not automatically better—its returns are variable and can sometimes be lower than a fixed deposit.
How Are Returns Generated and Reinvested in a Money Market Fund?
A Money Market Mutual Fund (MMF) pools investors’ money and invests it in short-term assets such as Treasury bills, commercial papers and bank deposits. These investments generate interest or income, which contributes to the fund’s return. As the fund earns income, the value of your investment can iRead more
A Money Market Mutual Fund (MMF) pools investors’ money and invests it in short-term assets such as Treasury bills, commercial papers and bank deposits.
See lessThese investments generate interest or income, which contributes to the fund’s return.
As the fund earns income, the value of your investment can increase.
When those returns remain invested, they become part of the money generating future returns.
That is how compounding works: your returns begin earning additional returns.
For example, ₦100,000 growing at 10% becomes ₦110,000, then ₦121,000 if the return stays the same.
MMF returns are generally variable, so a quoted rate is not necessarily guaranteed.
The longer you stay invested and keep reinvesting your returns, the more powerful compounding can bec