Fintellect

Greetings, We hope you found our previous post on open-ended, fixed maturity funds, both useful and informative. If you haven’t had a chance to read it yet, we’ve put it here so you don’t miss out! While 2020 ushered in a global crisis on a scale that humanity had never seen before, 2021 continues to teach us hard lessons earned over decades of practicing unsustainable economics. Pollution, strip-mining, deforestation, over-fishing, and hunting animals to extinction are just a few examples of the effect our economies have on the environment. As the world tries to move forward from the mistakes of the past, one of the things we’re trying to focus on is sustainability, and not taking more from the environment than we can put back. This focus is being delivered right at the root of our financial ecosystem by changing the way responsible investors invest their money. Measuring sustainability Sustainability today is measured in terms of E, S, and G, which stands for environmental, social, ...

To carry on where we left off with our previous post about money market funds, we’re now going to talk about the one single drawback to debt instruments, as well as the remedy. As we all know, debt instruments like corporate bonds, for example, decrease in value as prevailing interest rates go up. This is because when interest rates go up, people would rather put their money in banks than invest in bond funds at lower interest rates, causing the bonds to decrease in value. The inverse is also true here which means if prevailing interest rates fall, corporate bonds that were isssued before the fall, will increase in value. Maturity roll-down As we mentioned in our previous post on the money market, floating rate funds try to negate this effect by investing in bonds with interest rates that change in accordance with prevailing interest rates in the economy.  However, this is typically accomplished by increasing risk by investing in sub-par bonds and in some cases, debt that is close ...

  As we looked at the different types of debt securities in our previous post titled “Meet the Money Market,” in this post, we’re going to look exclusively at money market funds and how they are a great way to make some extra returns in under a year. As we mentioned earlier, money market funds invest in money market instruments, and since the investment period is only 1 year, the portfolio is strategically diversified in order to maximize returns over that 1 year period. These funds are highly secured since investments are only made in money market instruments issued by organizations with strong credit ratings. Think of it like this, instead of putting your money in a fixed deposit for a year, your lending it to organizations that have an excellent credit history, hence the two main characteristics of money market funds, low-duration, and low-risk.  These instruments include certificates of deposits, commercial papers, treasury bills, repurchase agreements, and more.  Now...