Guide: how do you buy a money market fund?
A money market fund is one of the most solid and simple savings channels available today. It lets you benefit from a return generally based on the interest-rate environment, with high liquidity and no commitment period.
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- 4 minutes
A money market fundA mutual fund that invests in low-risk, short-term assets and serves as a liquid alternative to a bank deposit. is one of the most solid and simple savings channels available today. It lets you benefit from a returnThe profit (or loss) from an investment over a certain period, usually expressed as a percentage of the original amount invested. generally based on the interestThe "price of money" – the amount paid for the use of someone else’s money, as income to the depositor or as a cost to the borrower.-rate environment in the economy, with high liquidityThe speed and ease with which money can be withdrawn from an investment and converted into cash in a bank account without significant penalties. and no commitment period.
Although the purchase itself is relatively simple, many people do not know how to carry it out in practice. In this guide, we will explain, step by step, how to purchase a money market fund through a bank account, which information is important to check before the purchase, and what you should know after the investment has already been made.
What should you prepare in advance?
- Login details for your online bank account.
- If you do not have permission to purchase securitiesA general term for a tradable financial asset (such as a share, bond, or unit in a fund) that represents a right to an asset or to profits. through the bank’s website, contact the bank and ask it to enable this option for you.
Note: Bank Leumi (בנק לאומי) has a “virtual portfolio” that allows you to make securities purchases for practice. The instructions use Bank Leumi’s virtual portfolio, but placing a real order is done in almost the same way. In general, the interfaces and steps are also very similar at the other banks.
Step-by-step instructions
Step 1: choose a money market fund
- Go to the list of money market funds on the “Financial Map” website (we will add a link when the system goes live on the website).
- Filter the data by “Year,” and you will see the past year’s returns arranged from highest to lowest.
- Choose one of the funds shown at the top of the list.
- Make sure the management fees are not higher than the overall average.
- After choosing a fund that provides a high return and has reasonable management fees, click its link.
- Copy the fund number and write down its name.
Step 2: enter your private account through the bank’s website
Enter your username and password.
After entering the website, click “Securities” on the right.
Step 3: choose the fund on the bank’s website
Paste or type the fund number in the upper field—“Search for a Security.”
After you enter the number, the fund’s name will appear automatically beneath the number. Make sure it matches the fund you chose. If everything matches—click the fund’s name.
Step 4: verify the fund’s details
The fund’s details will appear on the screen. Make sure again that this is indeed the fund you chose, and then click the green “Buy” button.
Step 5: purchase amount
Enter the amount you wish to purchase in the “Estimated Cost” field, and then click “Continue.”
Step 6: continue the purchase stage
The system will display the “Quantity in Units” that can be purchased for the amount you entered, and the estimated cost will be updated accordingly.
Step 7: approve the purchase
The system will display the purchase details and ask you to approve it.
Step 8: bank confirmation
The system will confirm the instruction.
Step 9: instructions and executions
In the “Instructions and Executions” category, you can view the purchase instruction you entered.
The purchase instruction is executed only at the end of the trading day, so it can be cancelled until the stock exchange’s trading day ends (around 17:00 on a standard trading day).
An important final point: Remember that purchase and sale instructions for a money market fund are not immediate and are carried out only on business days (usually for requests submitted by 16:00), and that discounted management fees tend to change, so it is recommended to track them every few months on the “Financial Map” website. Alongside this, the fund provides a dramatic tax advantage during periods of inflationA process of general price increases that reduces the purchasing power of money (the same amount of money buys fewer products)., because you will pay 25% tax only on the real profitThe actual gain remaining from an investment after deducting the rate of inflation. (above the index) and not on the entire nominal profitThe "raw" monetary gain without taking into account the decline in the value of money due to inflation..