Money Market funds

flopsy1973

Another rookie question if they are only getting about 4%  without costs are they worth the hassle compared to fixed oe easy access what am I missing here thanks

Bravepants

flopsy1973 said:

Another rookie question if they are only getting about 4%  without costs are they worth the hassle compared to fixed oe easy access what am I missing here thanks

Interest rates are closer to those that bank get when lending each other.

Pensioncraft has a good video.

https://youtu.be/qMTkreV2CRU

wmb194

flopsy1973 said:

Another rookie question if they are only getting about 4%  without costs are they worth the hassle compared to fixed oe easy access what am I missing here thanks

Compared to a fix you're not locked in for the term and, as things stand, compared to easy/instant access you'll earn a better rate.

Swipe

wmb194 said:

flopsy1973 said:

Another rookie question if they are only getting about 4%  without costs are they worth the hassle compared to fixed oe easy access what am I missing here thanks

Compared to a fix you're not locked in for the term and, as things stand, compared to easy/instant access you'll earn a better rate.

Plus BOE rates are expected to go up again by 25bps next week

TheBanker

Also the fact that most retail SIPP platforms don't facilitate fixed rate savings accounts. So MM funds are useful for people who want to keep their funds in cash but want to get a better return than leaving the funds in the platform's cash account. 

Keezing

I use the Vanguard Short Term Sterling Money Market fund inside my Stocks and Shares ISA as a place to park funds that I want to invest into the market in the future without taking the risk of investing a large sum at once.

in other words, £20k into the MMF for the new financial year, then £1,667 per month switched from the MMF into a Global All Cap fund.

This means I get roughly 4% (minus fees) on the cash tax free, which would be hard to achieve any other way, for example I would need to pay 45% tax if I kept the money in a regular savings account, and if I put the money in a Cash ISA I wouldn’t be able to DCA into the Global All Cap fund.

GeoffTF

billy2shots said:

Stupid rookie MMF question. 

When are people receiving interest?

In the key information I am seeing 'Dividends ' paid annually,  bi-annually, quarterly but not monthly. 

When is the income / fund growth (if acc) received?

Which fund are you looking at? You need to find more information about the fund, understand how these funds work and understand the tax rules.

GeoffTF

dunstonh said:

billy2shots said:

Stupid rookie MMF question. 

When are people receiving interest?

In the key information I am seeing 'Dividends ' paid annually,  bi-annually, quarterly but not monthly. 

When is the income / fund growth (if acc) received?

Short term moneymarket funds have to discourage those dipping in and out.  So, they use longer frequencies for the distributions.  They also have a longer period where they go XD to payment.

So, for example, RL's fund went XD last week but it won't get paid until the end of June.

If you use the income units, you won't get any growth in the unit price apart from the accrued interest before it goes XD.  Once it goes XD, the unit price drops back again.

Acc units, retain the interest within the fund, So, the unit price will increase as it goes along.  I always use inc units.

If you dip in and out, you will be disadvantaged only by your dealing costs. The income unit price grows daily and falls on the XD date by the dividend paid. HL gives graphs for the unit price and total return, and the XD and payment dates for the RL income units:

https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/r/royal-london-short-term-money-market-class-y-income

That shows very clearly what is happening. The price of the accumulation units does not fall on the XD date, but you do not receive the dividend (but it is taxable as though you did). The Vanguard short term money market fund pays dividends monthly.

billy2shots

GeoffTF said:

billy2shots said:

Stupid rookie MMF question. 

When are people receiving interest?

In the key information I am seeing 'Dividends ' paid annually,  bi-annually, quarterly but not monthly. 

When is the income / fund growth (if acc) received?

Which fund are you looking at? You need to find more information about the fund, understand how these funds work and understand the tax rules.

It would be held in a fidelity ISA (and maybe some in sipp) so no tax. 

Looking at Royal London short term mmf. 

GeoffTF

billy2shots said:

GeoffTF said:

billy2shots said:

Stupid rookie MMF question. 

When are people receiving interest?

In the key information I am seeing 'Dividends ' paid annually,  bi-annually, quarterly but not monthly. 

When is the income / fund growth (if acc) received?

Which fund are you looking at? You need to find more information about the fund, understand how these funds work and understand the tax rules.

It would be held in a fidelity ISA (and maybe some in sipp) so no tax. 

Looking at Royal London short term mmf. 

In that case, see my reply to Dunstonh above. The HL website tells you what you need to know for that fund. It is less good for some other funds.