Platform Fees and Money Market funds

rocker12

Hello All,

I am on HL where basic fees are .45% per annum fund held.

Money Market funds currently expect to return less that .45%. For example, Henderson Money Market is returning much less than .45%.

Does this mean effectively that one should not invest in Money Market funds through HL or other UK platforms?

Note: I am asking this because the above doesn't make sense to me, so I am expecting my reasoning is wrong (but calling HL did not help). Thanks in advance to anyone who can set me right.

Note2: I have a lump sum of cash I would like to park in money market or similar for the short term. I also have an account in the US where I would normally use Money Market for this purpose, but there there are no fees to hold such a fund.

TakeCareOfThePennies_2

Any reason you want to stick your cash in the markets and not keep it as pure hard cash in a bank account (or as cash in your investing account) ?

As far as I'm concerned, short term cash should be just that. Cash.

bowlhead99

At the moment, money market funds are paying little, because interest rates are at an all time low.

In a US brokerage account the standard thing to do if you have got cash that you don't want invested in equities and bonds is to stick it in a money market account.

However over here the investment platforms generally run their own cash park within your account. If you sell an equities fund or a bond fund or a stock/share of an individual company, your proceeds will sit in cash. You don't need to do anything with that cash, it can just sit in your account, as cash, until you buy something else, days or weeks or months later.

You are right, HL have fees for holding funds, and they also have fees for holding shares and ETFs, in their ISA or SIPP (although not in their regular 'fund and shares' taxable account). But they don't have fees for holding cash.

So, you can use your cash to buy a money market fund and pay 0.45% a year for the privilege of them running a platform facility to allow you to access that fund... or you can just leave it as cash with no charges

http://www.hl.co.uk/investment-services/fund-and-share-account/charges-and-interest-rates

When holding the cash, they pay tiered interest rates. Nothing much, because it is an instant access accounts and interest rates are low. At some point in the past they paid a percent or more. At the moment, 0.1% on amounts above £50k, and less below.
http://www.hl.co.uk/charges-and-interest-rates

If you want better rates, look an bank accounts elsewhere, which is perhaps what TCOTP suggests. Definitely not worth paying to access a liquid money market fund in sterling with the risks that entails. But if you just want to get out of funds/investments temporarily and park the cash for a while, hopefully the above achieves what you need.

TakeCareOfThePennies_2

bowlhead99 wrote: »

If you want better rates, look an bank accounts elsewhere, which is perhaps what TCOTP suggests.

Partially yes, it should not be a particularly strenuous exercise to beat 0.45%.

But 70% of my thinking was in the risk front first.

Consider risk before reward.

dunstonh

Any combination....

1 - Change your platform to a cheaper one
2 - Change your platform to one that has a cash account
3 - dont invest in money market funds (rarely a need)

jimjames

dunstonh wrote: »

Any combination....

1 - Change your platform to a cheaper one
2 - Change your platform to one that has a cash account
3 - dont invest in money market funds (rarely a need)

2. HL has a cash account that is free so no need to move platform, just use that instead.

rocker12

I appreciate these helpful comments, and big thanks to bowlhead99 for the very detailed and clear explanation.

Basically, I have some ££ that I am going to move gradually into ETF's (I will pound-cost-average it). I have had some savings accounts but don't want to get into the level of hassle that entails for the amount of return I will get.

Sounds like my best move will be to just keep the £££ in HL cash as I move it onto shares more gradually. Again, thanks all for taking the time to provide your helpful comments.

(BTW, before anyone says, I am aware of articles arguing against pound-cost-averaging. Anyhow…)