The MoneyOwl WiseSaver‘s underlying gross yield on their assets reached 4.2%.
WiseSaver is MoneyOwl’s cash management account. If you are a MoneyOwl client, you can park your cash in WiseSaver to earn a higher return than your regular savings account.
WiseSaver taps into the Fullerton Cash Fund, which is a money market fund that invests in a portfolio of Singapore Dollar fixed deposits.
The fund invests only in Singapore fixed deposits, so they don’t take on currency and duration risks. When the interest rate rises, the negative impact on the Fullerton Cash Fund is very, very, very low because the fund’s average duration is less than four weeks.
This is why amidst one of the worst periods for bonds since the 1970s, the money market funds were relatively unaffected.
In terms of cash management, MoneyOwl chose the conservative route some time ago when they used only a money market fund instead of funds that invest in short-duration bonds. If they did, they would be feeling the heat currently as many investors of cash management portfolios were shocked their cash management portfolio could go negative.
Money market funds are attractive because
- Unlike you, they can bring a large sum of money to financial institutions to get a better rate.
- They can help you source deposits with higher yields, thereby saving search costs.
- If they stick to a conservative mandate, you know your capital is intact.
But do note that you can lose money on deposits if the bank has a problem, but that can be said for any bank out there.
Does that mean if you invest in the WiseSaver, you will earn 4.2%?
The 4.2% is the 5-day moving average of the indicative yield of the Fullerton Cash Fund portfolio. This rate used to be as low as 0.35%, sometimes 0.70%.
4.2% means that Fullerton can roll the maturing deposits into deposits that provide a high yield.
If you invest in the fund, your returns would be higher if Fullerton captures more of this high rate.
The one-year return would likely be close to this 4.2% minus the expense ratio and other costs. Fullerton Cash Fund’s current management fee is 0.15%, and if you buy through MoneyOwl, they do not charge additional sales charges, advisory fees or platform fees.
We can review the past fund returns. No negatives and can compare and contrast to the Singapore dollar banks saving deposit rates.
Comparing to Other Money Market Funds Available
Fullerton Cash Fund, which is the underlying fund for MoneyOwl WiseSaver, is not the only money market solution out there.
If you have access to iFAST Fundsupermart, Poems or DollarDex, you can invest in them.
When evaluating these money market funds, you might want to check whether the fund’s mandate is more short-term performance or if they really constrain themselves to invest in fixed deposits.
I do think that even if they invest in short-term bonds, they should not go too negative if the majority are in fixed deposits.
- The United SGD Money Market Fund is not bad. Based on the Jul factsheet, their weight yield is 5.5%, and the average maturity period is about 1.44 years.
- The LionGlobal SGD Money Market Fund has a longer duration and, from the factsheet, invests mainly in short-term bonds. The average yield is 2.5%, but their factsheet is very outdated (June)
- The Phillip Money Market fund‘s factsheet shows the changes in average yield. From Apr to Oct 22, the average yield on their investment is as follows:
- Apr: 0.339%
- May: 0.486%
- Jun: 0.737%
- Jul: 0.797%
- Aug: 1.157%
- Sep: 1.52%
- Oct: 1.936%
Fullerton’s fund is comparable but I thought their average duration is shorter and the higher yield is a result that they report to MoneyOwl more recently. I do expect the yield for all three money market funds mention here to have a higher current yield.
Ideal Use Case for Money Market Fund
Money market funds have a particular set of characteristics:
- Very hard to lose the principal sum
- The return will fluctuate based on very short-term interest rates. This type of instrument is most sensitive to interest rates. If rates move up to 10%, the money market will re-deposit matured deposits at close to 10%.
- You can pull out $2000 out of your $50,000 investment to use, leaving the rest to continue earning that return fuss-free.
- Delegate your time cost of searching and reinvesting in safe, higher-return securities.
- 1-week illiquidity.
- Invest a large sum of money. Whether you have $10 million in cash to deploy or $10 to deploy, WiseSaver can take your money.
- Diversify the very slight risk of a single bank failure.
For the non-traders, money market funds can be the basis of where you park your spare cash, provided you don’t enjoy searching high and low for safe and high returns.
With less capital on the investment, WiseSaver is excellent if you wish to park a large sum of money.
This would be less ideal for traders who require their funds to be more liquid. If you are the wealth builder who keeps nitpicking whether you are getting the best returns, this would not be your ideal instrument.
With money market funds, you will have a few decent ways to get returns that are sensitive to the latest interest rates, and that are relatively safe for a large amount of money if you include the following:
Invest in MoneyOwl WiseSaver in a Fuss-Free Way
MoneyOwl has made it easy to invest in the WiseSaver, whether you have $10 million or $10. The minimum starting amount to invest is $10!
There are no advisory or sales charges tied to it.
If you wish to sign up, you can earn a higher, safer return for your cash and support me through My MoneyOwl Referral Promo Code Link
If you sign up for comprehensive financial planning, insurance or investment portfolio individually, you can get S$20 GrabFood credits each. Or, if you sign up for all, you will be able to get S$60 in total. If you invest in WiseSaver, it will get you $$20 in GrabFood credits.
And now, MoneyOwl has an outstanding promotion.
- Create an investment account with MoneyOwl
- You are a new customer to MoneyOwl
MoneyOwl will credit $20 worth of WiseSaver units to your account without you needing to fund it!
So if you invest some money with WiseSaver, which won’t lose you money (based on what I have explained), then you will get:
- $20 worth of WiseSaver units
- $20 Grabfood credit
Which sounds like a good deal, but only if you go through my referral link.
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