As the low interest rate environment persists, yields on low-risk assets in China have entered a downward trajectory, with the average seven-day annualized yield of money market funds gradually approaching or even falling below 1%. This investment vehicle, once regarded as the "national wealth management tool," is now facing the challenge of continuously declining returns. How should ordinary investors respond to this situation?
Ordinary investors need to rationally recognize that the current decline in money market fund yields is primarily influenced by the macroeconomic environment, including loose monetary policy and falling market interest rates, rather than risk exposure inherent to the products themselves.
Despite declining yields, money market funds still possess three core advantages: First, low risk - money market funds primarily invest in short-term money market instruments such as bank deposits, interbank certificates of deposit, government bonds, and central bank bills, which are high-quality underlying assets. Second, strong liquidity - convenient subscription and redemption, with most products supporting T+0 or T+1 redemption (subject to specific platform announcements), and some money market funds (such as Yu'e Bao) are deeply integrated into consumer payment scenarios, enabling direct online payments and meeting investors' immediate fund usage requirements. Third, low investment threshold - typically starting from 1 yuan. Therefore, money market funds remain highly convenient tools for idle money management, playing an important role in our daily "liquid money" investments. According to data from the Asset Management Association of China, money market fund assets have continued to grow against the trend this year, reaching 14.6 trillion yuan by the end of July 2025, an increase of 1 trillion yuan from the beginning of the year.
Currently, as ordinary investors, besides rationally viewing money market fund yield fluctuations and adjusting return expectations, there is a greater need to scientifically manage idle funds - pursuing moderate yield enhancement through tiered allocation while ensuring fund safety and liquidity.
For example, for idle funds needed in the short term (within 3 months), investors may consider continuing to hold money market funds to maintain fund liquidity and safety, meeting short-term expenditure needs. For idle funds not needed for 3 months or more than half a year, investors may consider allocating to interbank certificate of deposit index funds, short-term bond funds, and similar products to pursue relatively higher returns.
Overall, there is no one-size-fits-all investment solution. What matters is making reasonable allocations based on one's own fund usage plans and risk tolerance. Although current money market fund yields are not as attractive as before, they still hold unique value in asset allocation. As investors, maintaining rational expectations and proper fund planning are essential for steady progress in a low interest rate environment.
Risk Warning: Purchasing money market funds is not equivalent to depositing funds in banks or deposit-taking financial institutions. Fund managers do not guarantee fund profitability or minimum returns.
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