48) Money Market Fund vs Bond Fund

48) Money Market Fund vs Bond Fund.

You already heard about Unit Trust has a few fund types. You heard about Money Market, Bond and Equity funds. 

You  may be wondering what is the difference between a Money Market and Bond Funds. It looks similar from a Unit Trust investor point of view. In fact the fund performance graphs look similar too.

Let's look at a sample of the 2 funds, 10 years performance from Jul 2007 to Jul 2017.

Notice the similarities:
a) Fund performance had little fluctuations
b) Performance slope upwards over the years

Notice the differences:
a) Money Market very stable, hardly any fluctuations.
b) Bond had some fluctuations, even some losses in 2008. This means a Bond fund has higher risk than a Money Market fund.
c) Bond perform better over the 10 years.

In terms of Unit Trust investment, you may be charged 1% initial service charge for a Bond fund. While for Money Market fund, there may be no initial service charge. The charges can vary depending on the fund and Unit Trust Management Company. 

With the initial service charge, you need to keep investing in a Bond fund for a longer period. This is to allow the bond fund performance to give higher return than the initial service charge. 

You may prefer Money Market fund if you are investing for a short period. As there is no initial service charge, then any investment period will do. It is similar to keeping money in a Savings Account. 

Both the Money Market fund and Bond fund give you the flexibility to add more investment into your account at any time. Withdrawals can be easily done at any time too. No need to wait for maturity period like Fixed Deposits.

Please be reminded and be aware that all investments have risk. Do consult your professional investment and financial consultants.

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For more related articles:

239) Bond Specification & Calculationhttps://highlevelrules.blogspot.com/2020/03/239-bond-specification-calculation.html

230) Differences between investing into Bond Market vs Bond Fundhttp://highlevelrules.blogspot.com/2019/07/330-bond-market-vs-bond-fund.html

222) Does Bond Fund Move Opposite to Equity Fund?
http://highlevelrules.blogspot.com/2019/03/222-does-bond-fund-move-opposite-to.html

22) Bond Price Moves Opposite to Bond Yields
https://highlevelrules.blogspot.com/2017/06/bond-price-moves-opposite-to-bond-yields.html

48) Money Market Fund vs Bond Fund
http://highlevelrules.blogspot.com/2017/07/money-market-fund-vs-bond-fund.html

61) Unit Trust Bond Fund Vs Fixed Deposit
http://highlevelrules.blogspot.com/2017/07/unit-trust-bond-fund-vs-fixed-deposit.html