A money market fund is an investment, not a bank deposit.
Its manager may aim to preserve capital and liquidity, but returns and principal are not guaranteed, redemption may not be instant, and investment products are not covered by Singapore’s Deposit Insurance Scheme.
Identify the legal product
A marketing label such as cash management does not decide whether the underlying vehicle is a deposit, fund or combination. Find the issuer, scheme name and Product Highlights Sheet. (SDIC consumer guide)
SDIC covers eligible Singapore-dollar deposits up to S$100,000 per depositor per scheme member in aggregate. Foreign-currency deposits, structured deposits and other investment products are not insured.
| Situation | What changes |
|---|---|
| Money must be available instantly | Keep the required amount in an appropriate transaction deposit |
| Product is a unit trust or fund | Read the PHS for capital, credit, liquidity and redemption risks |
| Advertised yield is higher than a bank account | Compare net yield after fees and without assuming the rate continues |
| Cash is an emergency reserve | Split by access deadline and tolerance for small losses or delays |
Read the capital warning
A money market fund may seek to preserve value but can state expressly that capital and returns are not guaranteed. Record the worst plausible loss and whether the NAV can fall below purchase value. (MAS OPERA money market scheme record)
An app may accept a redemption instantly while settlement takes one or more business days. Test cut-off, weekends, holidays and where proceeds are paid.
Example: If S$30,000 of emergency cash includes S$8,000 needed within 24 hours, the access test may justify keeping at least that S$8,000 in an appropriate instant-access deposit rather than a fund.
Compare net yield
Subtract management, platform and transaction costs and note that a displayed annualised yield can change. Do not compare yesterday’s fund yield with a fixed deposit’s guaranteed contracted rate as if both were fixed.
Match each cash layer to the bill or crisis it must cover. Keep immediate needs outside a vehicle whose value or settlement could move.
- Identify the underlying vehicle
- Open the PHS and prospectus
- Check SDIC coverage
- Record settlement time
- Subtract all fees from yield
- Stress-test a delay or small NAV loss
- Keep immediate bills in the right cash layer
