How does mutual fund account works from your local bank?
Please briefly explain why you feel this question should be reported.
Please briefly explain why you feel this answer should be reported.
Please briefly explain why you feel this user should be reported.
Think of it like this You give money to the money market fund - the fund manager pools your money with money from other investors - the fund invests it in relatively short-term instruments such as: Treasury bills Commercial papers Bank deposits Certificates of deposit Other short-term, interest-bearRead more
Think of it like this
See lessYou give money to the money market fund – the fund manager pools your money with money from other investors – the fund invests it in relatively short-term instruments such as:
Treasury bills
Commercial papers
Bank deposits
Certificates of deposit
Other short-term, interest-bearing instruments
The fund earns income from those investments and your unit value increases accordingly.
Example
Suppose you invest ₦1,000,000 in a money market fund.
If the fund earns, say, 15% over a year, before applicable fees/taxes and assuming the rate stayed around that level, your investment could grow to roughly:
₦1,000,000 → ₦1,150,000
You normally don’t have to personally buy Treasury bills or negotiate bank deposits. The fund manager does that for you.
But there’s an important difference
If you put ₦1 million into a normal bank savings account, you’re depositing money with the bank.
If you put ₦1 million into a money market mutual fund, you’re buying units of an investment fund. The fund’s assets are invested separately according to its mandate.
So even when the fund is offered through a bank, the bank and the fund are not necessarily the same thing.