Impregnable as a Great Wall | A good partner for spare money management: money market funds, interbank certificate of deposit index funds

Since the beginning of this year, the investment enthusiasm of fixed income funds has remained high, but in the face of more than 4,000 fixed income funds in the whole market, how to make good investment choices? Recently, the Great Wall Fund and Leek Quaner jointly planned the "Stabilize the Waves, Solid as the Great Wall - Advanced Guide to Fixed Income Funds", on this basis, we launched the "Solid as the Great Wall" series of content accompaniment, detailed dismantling of the knowledge of the treasure book, and explore the mystery of fixed income fund investment with you, and help the ship of family asset allocation to be stable and far-reaching!

Deposit rates have dropped again! On July 25, the six major commercial banks collectively lowered the listed interest rate of RMB deposits, and after the adjustment, the listed interest rates of time deposits of the six major banks bid farewell to the prefix "2" and ushered in the "1" era. Looking at the present, what other relatively stable investment varieties are there? Fixed income funds may be a good choice. In this issue, let's start with the entry-level money market fund and the interbank certificate of deposit index fund, which are good partners for "idle money management"~

1. Money Monetary Fund

When it comes to money market funds, everyone must be familiar with them, and most of the "baby products" we buy are essentially money market funds.

The so-called money market fund refers to a fund that invests in the money market, and its investment objects are usually securities within one year, such as government short-term bonds, commercial papers, bank certificates of deposit, interbank certificates of deposit, bond repurchases, etc. These investment targets have high credit ratings and good liquidity, which determines that money market funds have the characteristics of relatively low risk and high liquidity, and their past performance is relatively stable. (The fund has the risk of income fluctuation, which does not represent a return guarantee or any other form of income commitment)

The liquidity of money market funds is mainly reflected in its quick redemption function. Fast redemption[1] [2] means that investors can obtain the redemption proceeds in a very short period of time without waiting for the fund company to process the redemption application. At present, the direct sales platform of most fund companies, or some large-scale distribution channels, have opened the fast redemption function, but the transfer and arrival limits of different sales channels are different, generally speaking, money market funds within 10,000 yuan on a single platform can achieve rapid redemption.

Therefore, money market funds are more suitable for individuals and institutions with lower income requirements and more emphasis on liquidity. So, if you want to allocate money market funds, how should you choose? Here are three ways to start:

1) Look at the size of the fund

If the scale of a money market fund is too large or too small, it is not conducive to the investment management of the fund manager, which will raise the overall cost and lower the investment income.

2) Look at the yield

There are two important indicators of the return rate of money market funds: the seven-day annualized rate of return and the return of 10,000 shares. 10,000 shares of income refers to the daily specific income that can be obtained by purchasing 10,000 yuan of money market fund; The 7-day annualized rate of return is the annualized rate of return estimated based on the return of the money market fund in the past 7 days. Generally speaking, the daily return of 10,000 shares varies greatly, and we mainly refer to the seven-day annualized rate of return index when comparing the yield of money market funds.

3) Pay attention to the proportion of institutional holdings

Institutional holdings are too high, which may bring risks to the stability of income and liquidity of the fund. For example, when encountering market turmoil, institutional investors redeem large amounts, and fund managers have to sell their assets at a low level, which may lead to a decline in returns; When the income level of the fund is relatively high, if there are institutional investors who subscribe in large amounts, it will dilute the income of old holders to a certain extent. Therefore, you should try to choose products with a high proportion of individual holdings, and you can pay attention to this indicator in the fund's interim report and annual report.

2. Interbank Certificate of Deposit Index Fund

An interbank certificate of deposit index fund, simply put, is a passive index fund that invests in a basket of "interbank certificates of deposit".

So, what is an interbank certificate of deposit? By analogy, the interbank certificate of deposit is the certificate of deposit between banks, and its issuers are mainly policy banks, commercial banks, rural cooperative financial institutions, and other depository financial institutions recognized by the People's Bank of China, and the investors are mainly banks, securities companies, insurance companies, funds and other financial institutions.

It can be seen that interbank certificates of deposit are mainly for institutional investors, and individual investors who want to participate in this market can use interbank certificate of deposit index funds. This type of fund mainly tracks the CSI Interbank Certificate of Deposit AAA Index and invests in interbank certificates of deposit with an interbank market entity rating of AAA and an issuance period of 1 year or less.

Interbank certificate of deposit index funds, like money market funds, are generally low-risk and low-return products, however, the vast majority of interbank certificate of deposit index funds in the market have set a minimum holding period, which can only be redeemed after a certain period of time, and special attention needs to be paid to this when purchasing.

In contrast, the volatility risk of interbank certificate of deposit index funds is generally slightly higher than that of money market funds, and correspondingly, the return performance is slightly better. From the past perspective of the CSI Interbank Certificate of Deposit AAA Index, from 2014 to 2023, the index has maintained a positive return year after year, with an annualized return of 3.40%.

CSI Interbank Certificate of Deposit AAA Index (%)

Note: The data comes from wind, the past performance of the index does not represent its future performance, there is a risk of income fluctuation, and it does not represent a return guarantee or any other form of income commitment, so investment should be cautious.

Therefore, interbank certificate of deposit index funds may be more suitable for investors with low risk tolerance, spare money and financial management but do not want to have too much volatility, or those who have asset allocation needs and want to add stable products. (The fund has the risk of income fluctuation, which does not represent a return guarantee or any other form of income commitment)

In general, money market funds and interbank certificate of deposit index funds are entry-level fund products, which have the characteristics of relatively low risk, stable returns and high liquidity. As for the comparison between the two, it needs to be decided according to the individual's investment goals and needs - if you want a slightly higher return, the interbank certificate of deposit index fund may be more worth considering; If you are looking for higher liquidity, money market funds are relatively better. In the next issue, we will continue to learn about pure debt funds in fixed income funds, so stay tuned.

If you want to know more about fixed income investment, welcome to continue to pay attention to the "Solid Great Wall" companion series, and we will see you next time!

Disclaimer: The information contained in this communication has been derived from sources and researchers' personal judgment that the Company believes to be reliable, but the Company makes no representations or warranties, direct or implied, as to its accuracy or completeness. This communication is not intended to be a complete representation or summary of the relevant securities or markets, and any opinions expressed are subject to change without notice. This communication should not be relied upon by the recipient as a substitute for his or her independent judgment or as a basis for investment decisions. The Company or its affiliates, employees or agents shall not be liable for any person's use of all or part of the Content or for any loss arising therefrom. Without the prior written permission of Great Wall Fund Management Co., Ltd., no one may distribute, copy, reprint or publish this report or any part thereof in any form, and no one may make any abridgement or modification of this communication contrary to the original intention. The fund manager reminds that every citizen has the obligation and right to report money laundering crimes. Every citizen should strictly abide by the relevant laws and regulations on anti-money laundering. Invest with caution.