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If I Invest in a Money Market Mutual Fund at 20% Interest and the Rate Drops to 17%, Which Rate Will I Be Paid in Nigeria?
No.... you will not continue earning 20% simply because that was the rate when you invested. If you invest in a money market mutual fund when the yield is 20% and the fund’s yield later drops to 17%, your return will gradually adjust to the new prevailing rate. In other words, your earnings move witRead more
No…. you will not continue earning 20% simply because that was the rate when you invested.
If you invest in a money market mutual fund when the yield is 20% and the fund’s yield later drops to 17%, your return will gradually adjust to the new prevailing rate. In other words, your earnings move with the fund’s current yield over time.
This is because money market mutual funds in Nigeria do not have fixed interest rates. Their returns change based on market conditions because the fund manager continuously reinvests the pooled money into short-term instruments like treasury bills, fixed deposits, and commercial papers at whatever rates are available at the time.
So the 20% you see before investing is not a guaranteed locked-in return.
it is simply the fund’s current or recent annual yield.
In summary: money market mutual funds in Nigeria have changing returns, not fixed returns, so your earnings can go up or down depending on market interest rates.
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