Three ways to offer yields to your investors

Investing is a good way to grow wealth, save for retirement and reach your financial goals. But with so many options available, it can be difficult to know where to start. 
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This article discusses three savings and investment options you can offer investors - Money Market Funds, Gilts and Savings Accounts. As with any investment, these options differ in risk and return potential. 
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This blog is not financial advice; investors should always seek professional financial advice if unsure. When investing, your capital is at risk. The value of your investments can go up as well as down.  You may get back less than you put in and lose all your initial investment. 

Savings Accounts
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As the name says, these are regular savings accounts that help investors put money aside each month and pay interest regularly (monthly or yearly, or depending on your account). 
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Money stored in traditional cash savings accounts is typically secured up to a certain limit by government agencies and provides a level of security. They also let investors access funds as needed, offering a source of funds for emergencies. 

Some savings accounts offer a higher interest rate in return for keeping your money on deposit for longer. Savings accounts are the easiest to understand of the three options, but they still carry investment risk as the money is invested with the bank. 
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Despite being the easiest way to save and invest money, savings accounts generally offer the lowest interest rates compared to the investment options above. 

Money Market Funds 
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Money Market Funds (MMFs) are a way that investors can potentially earn a higher yield. These funds are typically invested in a combination of short-dated instruments and are expected to offer a higher return than cash.  
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Some of the benefits of these funds are - 

• High liquidity compared to other funds that helps investors access funds easily
• They usually provide higher yields compared to standard savings account 
• They can pay income or have income accumulated in the NAV (Net Asset Value) of the fund
• Reduces risk through diversification and can be lower risk compared to other mutual fund instruments
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But as often is the case, these come with their risks. MMFs are sensitive to market fluctuations and may lose value if interest rates increase suddenly and the short-term bond loses value. The potential for loss also depends on the type of instruments the fund is invested in.  
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Gilts 

Gilts came into the limelight earlier this year as the yield for these UK government bonds had risen, resulting in a drop in the price. The push for gilts was also supported by the rising global rates, the end of the Bank of England's gilt crisis buying programme, and more. 
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Gilts are usually seen as low-risk and low-return investments. Investors can buy and sell Gilts easily without any impact on their market prices. They can also offer tax benefits to the investors; for example, if held within an Individual Savings Account (ISA) or Self-Invested Personal Pension (SIPP), investors do not have to pay taxes on their Gilt holdings.
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You can read more about them here - Demystifying Gilts
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However, like MMFs, the value of Gilts is affected by inflation and can decrease if market interest rates rise, affecting the secondary market price. 
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Are you looking to offer your investors high-yield instruments and found this article helpful? You can get in touch with us at marketing@wealthkernel.com