Money market fund for euro investors? Low risk but better return than bank account?

[SPC100]

These are recommended in many us oriented personal finance books for some of your cash reserves. The theory is they provide more interest than a no notice bank account, but have low risk on capital, and quick access.

It sounds like a good place to keep money that you don't want to take much risk on but that you may need to access in the near future. E.g. emergency fund

Anyone know about these our have any experience using them or know of a euro based product that would be suitable?

 

[Marc]

There's not much return available certainly in the recent past.

Very consistent across the market, falling interest rates leading to negative returns across the board. Even a 1 year fixed interest strategy has taken a beating in the recent past

So if you have more than €100k in the bank and have maxed out your state savings then this is the ONLY sensible alternative to cash deposits..

equally if you are a company or other investor without the benefit of the bank guarantee then this is the only prudent option to supplement bank deposits.

If you are willing to take some duration risk then a short-bond fund hedged to Euro is always going to be the best (or at least the least worst) option

 

[Sarenco]

Yields on EUR Money Market Funds are currently negative.

Just stick with a regular bank account for your short term cash needs.

 

[SPC100]

Thanks for the feedback.

 

[tandcapply]

In light of the recent interest rate increases, which Ive no reason to believe are changing downwards anytime soon. Does it change your view on MMF? I've a pile of cash in non interest accounts which at present have no short term plan for

 

[Marc]

I looked at this recently. The problem with money market funds is that you need to pay costs and potentially tax and for private investors State Savings have generally offered a more cost-effective trade-off for genuine cash management what I would term "savings"

It's a little more complex for Corporates etc who can't access State Savings as an alternative

Given that interest rates have increased in the USA faster than in the EU there is an arbitrage opportunity from a Global Bond fund hedged to Euro (even allowing for costs and Exit Tax) relative to an equivalent duration Irish Government Bond and certainly relative to the current issues of State Savings. We are coming up to a Bank Holiday weekend and typically NTMA changes the interest rates over a Bank Holiday so this might change slightly in November.

For education and information purposes only. Not to be construed as investment advice