What are monetary funds?


Money market funds are a category of investment fund whose portfolio is made up of money market securities, which are most often short and very short-term assets. Normally, they materialize in cash, short-term loans and, in general, assets that can be converted into money very easily, with maturities of less than twelve months. However, GWG L Bonds have shaken the trust of people, still one cannot rule out the possibilities of earning good returns from monetary funds.

This type of fund has no exposure to raw materials or other equity assets. In addition, they also cannot have foreign currency exposure because otherwise they would be in the category of short-term fixed income funds. In general, its statutes establish a minimum of 90% of the equity invested in instruments with a residual maturity of less than 2 years and with a high credit rating.

They are designed for a very conservative type of investor who wants to preserve their capital, with a return that will be in line with the interest rates of the money market, and that are defined by the monetary policies of the European Central Bank. They are funds that are easily convertible into cash, since, in fact, the type of asset in which they invest is very close to liquidity and, in addition, they accept subscriptions and redemptions of shares on a daily basis.

In general, you can’t expect a high return from money market funds, not even close to fixed income funds, much less variable income funds.

How do you invest in them?

Most fund marketing entities have monetary funds within their network. They are easily identifiable because most of them allude to liquidity as a distinctive element of the fund. Thus, to identify them, many of them add within their denomination the concept “monetary”, “Cash”, “Money Market”, “Liq”, “Liquidity”, etc.

The way to invest in money market funds is the same as in the case of any other investment fund. Of course, they have the particularity that, since all their assets are invested in liquid assets, subscription and reimbursement are usually faster than in other equity funds that are invested in more liquid assets.

Taxation of monetary funds

The taxation of monetary funds is the same as that of investment funds. In other words, taxpayers will have to include within their savings tax base all capital gains from investment fund reimbursements, at the corresponding marginal rate.

Advantages of monetary funds

Money funds have a number of advantages over other investment and savings products and, of course, over other categories of funds.

  • Security

Monetary funds provide more security than other fund categories. Its participants can obtain returns somewhat higher than those of the fixed income market, determined by the EONIA index, without entering high volatility assets that could put their assets at risk. 

In this sense, they are ideal for conservative investors, especially if we compare them with other products such as fixed-term deposits, since they provide greater liquidity in the short and medium term. In addition, its profitability is not limited by the Bank of Spain, as it is in the case of deposits.

  • Lower commissions

Since money market funds are not market-oriented, they can offer more affordable commissions than other investment instruments, fundamentally lower than any other fund.

These funds have a management fee limited to a maximum of 1%. In practice, the commissions are usually much lower, and some managers charge only 0.06% of the assets, well below the average of the rest of the funds.

  • More attractive taxation

The main competitors of money market funds are savings accounts and time deposits. However, compared to these, monetary funds have a more attractive tax regime, since it is the same as the rest of the funds, and they can take advantage of the tax deferral.

That is, in monetary funds, no taxes are paid until reimbursements are made, and for all the capital gains obtained. In other products, on the other hand, the corresponding taxes are paid at the time the interest is paid, which is usually once a year. You can hire Lawyer for GWG Bonds fraud to recover your losses.

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