Between MMMF offering 18.54% yield and NBF offering 14.7% yeild. Which of them would you consider a better investment option and why?
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Between MMMF offering 18.54% yield and NBF offering 14.7% yeild. Which of them would you consider a better investment option and why?
The Money Market Mutual Fund (MMMF) at 18.54% is generally the better investment option for most individual investors. Why the MMMF (18.54%) Beats the Bond Fund (14.7%) Higher Net Return The MMMF yields 3.84% more per year than the Bond Fund. On a ₦1,000,000 investment, that is an extra ₦38,400 in rRead more
The Money Market Mutual Fund (MMMF) at 18.54% is generally the better investment option for most individual investors.
Why the MMMF (18.54%) Beats the Bond Fund (14.7%)
Higher Net Return
The MMMF yields 3.84% more per year than the Bond Fund. On a ₦1,000,000 investment, that is an extra ₦38,400 in returns every year.
Better Liquidity (Easier Access to Cash)
MMMF: Money market funds invest in short-term government debt (like Treasury Bills). You can usually withdraw your money in 24 to 48 hours without penalty.
Bond Fund: Bonds are long-term instruments. Withdrawing early can be slower or subject to market value fluctuations.
Lower Capital Risk in High-Interest Environments
MMMF: The principal value (unit price) stays stable (typically fixed at ₦1.00 per unit). You earn daily/monthly interest without risking your initial capital.
Bond Fund: Bond prices move opposite to interest rates. When interest rates rise, existing bond prices drop, which can temporarily reduce your total account value if you need to liquidate.
Summary
See lessChoose the MMMF for higher yield, greater safety, and quick access to your cash. Consider the Bond Fund only if you want to lock in a return for many years and expect interest rates to drop significantly in the future.
Simple example for you to understand If you put ₦1,000,000 in each and those annual rates remained unchanged: MMMF: ₦1,000,000 × 18.54% = ₦185,400 Bond fund: ₦1,000,000 × 14.7% = ₦147,000 Difference = ₦38,400 in one year. But there is an important point: 18.54% vs 14.7% does not automatically mean tRead more
Simple example for you to understand
If you put ₦1,000,000 in each and those annual rates remained unchanged:
MMMF: ₦1,000,000 × 18.54% = ₦185,400
Bond fund: ₦1,000,000 × 14.7% = ₦147,000
Difference = ₦38,400 in one year.
But there is an important point: 18.54% vs 14.7% does not automatically mean the MMMF is the better investment. Fund returns can change, and the historical/current yield is not necessarily what you’ll earn for the next year.
For an investor, I’d look at three things:
Expected return — how much the fund has been earning.
Risk — what can cause the value/return to fall.
Investment horizon — when you need the money.
So, in very simple terms:
MMMF = “I want relatively stable returns and easy access to my money.”
Bond Fund = “I am willing to accept more price movement in exchange for exposure to bonds.”
If you’re considering these specifically in Nigeria, I can also explain why an MMMF can currently show 18.54% while a bond fund shows 14.7%, and how the CBN/MPR and Treasury-bill yields affect both.
See lessI would consider MMMF and NBF as investments in two different jars, just like Mama Ngozi sorts her tomatoes in various baskets based on their quality. Let's say MMMF offers 18.54% yield, and NBF offers 14.7% yield.Now, imagine MMMF as the jar of tomatoes Mama Ngozi knows will yield 18.54% in a year.Read more
I would consider MMMF and NBF as investments in two different jars, just like Mama Ngozi sorts her tomatoes in various baskets based on their quality. Let’s say MMMF offers 18.54% yield, and NBF offers 14.7% yield.
Now, imagine MMMF as the jar of tomatoes Mama Ngozi knows will yield 18.54% in a year. It is like the top-grade tomatoes she sells that are almost sure to bring good profit due to their high quality. On the other hand, NBF is like the jar of tomatoes that promises a yield of 14.7%. While it may not be as high as MMMF, it still offers a decent return, just like the good quality but not the best tomatoes Mama Ngozi sells.
So, when choosing between these two jars, it depends on Mama Ngozi’s risk appetite. If she wants a higher return, she might choose the MMMF jar with the 18.54% yield. However, if she prefers a slightly lower return but with less risk, she might opt for the NBF’s 14.7% yield.
In conclusion, both MMMF and NBF are good investment options, just like the different baskets of tomatoes Mama Ngozi sells. The choice between the two depends on the investor’s risk tolerance and financial goals.
See less