Facing the dazzling array of financial products in the financial market, if you want to choose one that suits your own financial investment, but are afraid of falling into a pit, ordinary people's financial management is relatively simpler compared to professionals. There is no need to analyze K-line charts every day, nor is there a need to study macro policies daily, and you don't have to become a semi-expert, yet still not make money. For financial novices, money market funds are an ideal choice.

1. What kind of money market fund is suitable for ordinary people? The following three points can help you choose a money market fund that you like.

- Money market funds with a high proportion of retail investors are more stable.

There are so many money market funds in the market, how can we buy with confidence? Should we follow the big institutions to buy, after all, they are the most professional. If you think this way, then you have entered a misunderstanding. This is because institutional money market funds have very frequent subscriptions and redemptions. Generally, we retail investors are not very sensitive to changes in market interest rates, while institutions are particularly sensitive to the tightness of funds. As soon as "the central bank mom" releases a little bit of liquidity and there is a slight increase in money in the market, they start to subscribe in large amounts.

Advertisement

However, if there is a slight disturbance in the market these days and money becomes a bit tighter, they immediately redeem. So you will see that the subscriptions and redemptions of institutional money market funds are very frequent, and with such a large amount of funds, it will have a significant impact on the overall safety and liquidity of the money market funds.

How to determine whether a fund is a retail type, just look at its holder structure. Data will be provided by each fund. If the retail investor ratio of a money market fund reaches 70%, then its liquidity risk is very low, and even if interest rates change, the net value of this kind of fund will not fluctuate greatly.

Large-scale redemption of funds in financial terms is called "fund run," because institutions are too sensitive to market price changes. With a little disturbance, they are prone to run, leading to significant fluctuations in the fund, which is not stable enough.

2. Money market funds of moderate size have higher returns.

When a fund reaches a certain scale, the possibility of liquidation becomes relatively small. Is it true that the larger the scale of the fund, the better the returns, and the more stable it is?Research has found that the yield of money market funds (MMFs) and the scale of these funds exhibit an inverse U-shaped relationship.

MMFs of medium size tend to have the highest yields. For instance, those with a scale of less than 5 billion typically have a yield of around 3.5% or lower; those with a scale above 10 billion can achieve a yield of approximately 4.2% to 4.3%. However, when the scale reaches above 100 billion, the yield drops again, hovering around 4%.

Why is it not advisable for a fund to be too small? The most important investment product for MMFs at present is bank negotiated deposits, and the interest rates for these deposits are determined through negotiations between the fund company and the bank.

If a fund is too small, it lacks the leverage to negotiate with banks, and therefore cannot secure favorable interest rates.

Yu'e Bao is a particularly typical example. As the world's largest MMF, its liquidity and security are certainly good, but it is difficult for a large ship to turn quickly, and with a large portfolio, adjusting positions is slow. As a result, Yu'e Bao's yield is at a mid-to-lower level among MMF products.

From a market perspective, MMFs with a scale of approximately 10 billion to 40 billion have the highest yields. Therefore, the second principle of MMF selection is to choose MMFs of medium size, with a scale between 10 billion and 40 billion.

3. Compare historical performance and fee levels

Funds with good historical performance and low fees are more suitable for our investment. Fees are invisible costs that can erode returns, and this data is publicly available online. When you purchase an MMF, you can view these on third-party platforms for fund selection, such as Tiantian Fund, Haomai Fund, and Tonghuashun.

Through various principles of screening, more than ten funds with good past performance, a scale between 10 billion and 50 billion, and a retail investor share of over 60% have been identified on the Tiantian Fund website.II. Subscription and Redemption Timing for Money Market Funds

The subscription and redemption of money market funds also have timing considerations, and the following points should be noted:

Firstly, many people do not pay attention to a redemption provision when purchasing funds. Generally, money market funds operate on a T+1 redemption basis. This means that if you buy the fund today, you can redeem it tomorrow.

However, there are also funds that follow a T+2 or T+3 redemption schedule, which implies that you will only be able to redeem them two or three days later. This can result in a certain loss of liquidity. Therefore, if you have a particularly high demand for liquidity, you can avoid these T+2 or T+3 funds.

Secondly, the subscription of funds also has a timing effect because fund transactions are calculated based on working days. Generally, you should not buy on Fridays because redemptions are not allowed on Saturdays and Sundays. So even for T+1 funds, it effectively becomes a T+3 redemption. This is known as not buying on Fridays and not redeeming on Thursdays.

Thirdly, the investment direction of money market funds should be short-term monetary instruments. Generally, at the end of the month, quarter, mid-year, and year, the market funds are relatively tight. Therefore, you will find that the yield on funds subscribed at these times is relatively high.

III. Choosing Between Bank Wealth Management and Money Market Funds for the Average Person

After looking at money market funds, many people believe that the returns on bank wealth management and money market funds are similar. Indeed, both money market funds and bank wealth management belong to financial products with a relatively high level of safety, suitable for almost all types of investors. So, whether to buy bank wealth management or money market funds, choose the product that suits you from the following comparison points.1. The minimum purchase threshold for money market funds is typically 1 yuan, which poses almost no pressure for most investors. Money market funds can be considered a very accessible financial product, affordable for everyone. However, bank wealth management products generally have a higher entry barrier, starting at 50,000 yuan, which may be beyond the savings of some students and recent graduates. This is in terms of the purchase threshold.

2. In terms of liquidity, money market funds outperform bank wealth management products. Money market funds operate on a T+1 trading mechanism, where funds redeemed before 15:00 on a working day will be credited to your account on the next working day. Some "baby" products can essentially achieve T+0, allowing for immediate credit or within two hours.

In contrast, many bank wealth management products are in a closed format, with terms ranging from three months to five years. During this period, your funds are locked, and if you need to retrieve the principal for an emergency, the interest will be calculated at the demand rate.

3. Regarding the return rate, the 7-day annualized return rate of money market funds has recently been between 1.88% and 2.4%. Due to the global monetary easing, returns are trending downward. The return rate for bank wealth management products is between 3.2% and 3.8%, giving bank wealth management products the edge.

4. In terms of purchase convenience, money market funds are very easy to buy. They can be purchased at commercial bank branches, as well as through apps like Alipay and the Daily Fund website, allowing you to buy your desired products without leaving home. For the first purchase of bank wealth management products, you need to visit a bank branch for face-to-face signing and complete a risk assessment questionnaire. Subsequent purchases can be made directly on your mobile phone, making money market funds more convenient than bank wealth management products.

Based on the above comparison, choose a financial product that suits your needs. Generally, if you have a high demand for liquidity, consider keeping your money in money market funds. If you have funds that you don't need for several years, it is recommended to opt for bank wealth management, as the additional returns are quite significant. For the same amount of 500,000 yuan, a wealth management product can yield 20,000 yuan in a year, while a money market fund might only yield around 10,000 yuan, a difference of exactly double.