Invest in the money market

Dear Mr Tan

Please explain the difference between this fund & share. I have to buy @ bid price which is very much like buying share from the market. I do not understand how the yield of 3% is calculated. Some good shares give a better dividend yield.

-----------------------------

REPLY:

The money market fund is invested in money market investments, such as short term bonds and certificates of deposits. These investments currently yield about 3% per annum.

When you invest in the money market, you buy units at its unit price (or net asset value). The unit price changes everyday according to the value of its underlying investments.

If you measure change in the unit price over a few weeks, you will probably find that the annualised yield is about 3% per annum. This yield may change according to the underlying investments.

The manager of the fund will take a small charge (usually less than 0.5% per annum) from the fund. This charge has already been deducted to give you the net yield as reflected in the unit price.

I understand that the money market fund managed by NTUC Income has the following features:

* annual charge of 0.25% per annum (already deducted from the net yield)
* no transaction cost or sales charge when you buy or sell the units.
* a policy fee payable on the flexi-cash policy (invest in the money market fund)
* currently, a net yield of about 3% per annum.

To be sure, you should call NTUC Income and talk to their consultant, or visit their website.