Investors everywhere are struggling to find a safe harbour against the stock market’s volatility. Even cash is fast losing its value to the persistent inflationary environment.
For those who have invested in the stock market this year, you will find that the financial market has been extremely volatile amid a global race to hike interest rate hikes to tame inflation.
Given the uncertainty in global stock markets, some would prefer to ride out the bear market by holding onto their cash.
However, by doing nothing, your cash savings will lose value to inflation. In short, your purchasing power will decrease even if you don’t do anything to your investment portfolio.
Both scenarios do not bode well for your investments in the long term.
One alternative is to invest in fixed-deposit accounts, which offers a higher return but by doing so, you will have to keep your money with the fixed-deposit accounts for a certain period of time and there are usually many requirements to meet.
For all investors, young and old alike, it would be wise to take advantage of the money market to preserve your capital as well as the liquidity of your funds.
Money market preserves capital and gives you liquidity
This is where the money market will become important to your portfolio.
A money market fund is a type of mutual fund that invests in highly liquid vehicles such as cash, cash equivalents and high-rated, debt-based securities.
As money market funds invest in securities that mature in a short period of time, investors can liquidate easily for cash.
Among some of the common investments include bank certificate of deposits (CDs), high grade commercial paper (CP) or government treasury bills, also known as T-bills.
Aside from that, this is a relatively safe investment as only securities with the highest credit ratings are available in the money market.
Unlike most conventional cash equivalents, such as your savings account, the money market provides investors with a slightly higher yield.
Hiding out in money market funds can be rewarding
One of the biggest advantages of a money market fund is that it allows investors to pounce on the next opportunity in the stock market.
At ProsperUs, we offer some money market funds, such as the LionGlobal SGD Money Market Fund (SGX: 0P00006FZD).
LionGlobal SGD Money Market fund aims to manage liquidity and risk while looking to provide a return which is comparable to SGD short-term deposits.
Say Boon has previously highlighted the recession risk in his article. So, if you’re not willing to stomach the heightened volatility markets right now, the money market could be just the right investment vehicle for you.
Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.