It's been a while since I've talked about Phillips money market fund (MMF). A quick search revealed three articles:
1. POEMS money market fund (MMF) (2008)
2. Phillips money market fund (2009)
3. Phillips MMF (2010)
I know, from first look, they are all the same or similar sounding titles. No creativity on my part in choosing a title, haha!
For those who do not know, money market fund is a collection of short term bonds, deposits and savings. They don't give out interest like what stocks or even banks do. It's more like a unit trust where there's a NAV posted every day. If you buy say at 1.002 and after a month the NAV rises up to 1.012, then you have a return of 0.998% ( [1.012-1.002]/1.002 x 100%). The NAV keeps going up as the deposits and savings are capital protection upon maturity and even during the worst financial crisis, the NAV is steadily increasing.
Here's the returns I've tracked in the past:
2007: 2.01% pa
2008: 1.33% pa
2009: 1.04% pa
I didn't really track after that because it keeps dropping down as the interest rate environment is dropping also. But this yr and the last, the returns had been increasing again.
2015 Aug to 2016 Aug: 0.908% pa
If I take the more recent months, the returns will be even higher (but still less than 1% pa). It's time to take a look at this again to put your spare cash or emergency cash in. The process of taking in and putting in money is very fast, about 1 day usually (depending on time) and 2 business days latest.
What's the catch you ask?
It's not guaranteed by the bank deposit insurance, unlike fixed deposit (up to $50k per bank per pax, regardless of accounts in the bank). So, if Phillips MMF is to close down, then the money might not be able to recover. Well, in that case, don't put your whole networth in lah, just put in a suitable amount. You can use this is pay for your equities purchase using POEMS too, and that's what I do. The good thing about this is that it doesn't require you to jump through many hoops like minimum credit card spending etc. It's very good for people like me who don't have a fixed salary so I can't use those ocbc 360 accounts that people are raving about.
Thursday, September 29, 2016
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10 comments :
I think if cannot get 360, probably laddering/multiple fixed deposits is the best. My 360 account is yielding lower thanks to being unable to hit CC spend (though savings make up for it).
Hi Azrael,
Haha, I haven't got THAT much money to make a ladder using fixed d, so I'll stick to poems MMF first. When I have too much spare cash that I find it uncomfortable to put more into MMF, then I'll do other stuff.
Good suggestion though :)
how liquid is the monies?
as in , how long does it take for the money to be withdrawn etc?
is the interest calc on a pro-rated daily basis?
can i use it to buy from POEMS directly?
I quite like this fund, but I put most of my excess money in short term bond funds for the pick up in yield at the expense of the increased risk of capital loss. I'm willing to be paid to assume that extra risk (which is worth it in my view).
@foolish chameleon
When I opened my POEMS account, there was an option to automatically put cash just sitting idle into the Phillips MMF. I ticked that option, but I had already read up and was aware about it before I went to apply.
Now as long as I put money into my POEMS account, it automatically goes into the MMF. When I want to buy investments, it is automatically redeemed and used for purchases. When I sell investments, my cash that goes back into my account automatically create new units of the MMF.
At least, that's how I understand it works for me. Maybe someone else can clarify.
Hi foolish chameleon,
As GMGH mentioned, it is quite liquid. It is exactly as he mentioned regarding the MMF account that is used to buy stocks, and when sold will be automatically channeled to the MMF account again.
But if you're talking about withdrawing the money out from the account, it takes 1 day most of the time, perhaps 2 if you didn't do it by certain hours. 'Interest' is not a right term here, more like returns, because I mentioned in the post that it's more like buying unit trust with NAV. Since the NAV of the MMF increases every few days, your returns will be locked in when you 'sell' the units. And you do so by withdrawing out the money from the MMF account. To ans our question, it's calculated daily, but it's not like interest from banks.
Hi GMGH,
Haha, thanks for helping me out on answering the queries :)
It's exactly as you spelled it out :) Simi lobang for short term bond funds, recommend leh, haha!
Hehe, later I kena haunted by any "recos" I give!
I'll just "mention" 2 short term bond funds that I have personally owned before.
Nikko AM Shenton STBF - 0% sales charge, 0.3% mgmt fee, 16 year history, consistent returns of 2+% pa, current fund duration 1.45 years, largest drawdown of 4.3% from Sep 08 to Jan 09.
UOB United SGD Fund Cl A (Acc) - 0% sales charge, 0.6% mgmt fee, 18 year history, consistent returns of ~4% pa, current fund duration 1.8 years, largest drawdown of 3.38% from Aug 11 to Oct 11.
I think once you are willing to give up the "100% capital return guarantee" and instead have a willingness to risk 5% (at least based on past drawdowns), you gain access to a product with higher returns and more flexibility (compared to the traditional FD / endowments).
I'm always curious how other people manage their cash deposits since I rarely hear of people using anything other than an FD.
Hi GMGH,
Nah, we're all adults here, so we know not to blame someone cos we didn't do our own due diligence and follow. No worries here :)
I'll check it out, thanks!
i'm with POEMS, but a cash-only account, so i think i cannot go apply for such MMF.
Hi Bruce,
I think you can. Email or call your broker about it. You might need to open another acct which is together with the poems mmf though, i'm not sure about the process.
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