Money Market: Introduction

Whenever a bear market comes along, investors realize (yet again!) that the stock market is a risky place for their savings. It's a fact we tend to forget while enjoying the returns of a bull market! Unfortunately, this is part of the risk-return tradeoff. To get higher returns, you have to take on a higher level of risk. For many investors, a volatile market is too much to stomach - the money market offers an alternative to these higher-risk investments. The money market is better known as a place for large institutions and government to manage their shortterm cash needs. However, individual investors have access to the market through a variety of different securities. In this tutorial, we'll cover various types of money market securities and how they can work in your portfolio.

Content

What is Money Market? Features of Money Market? Objective of Money Market? Importance of Money Market? Composition of Money Market? Instrument of Money Market? Structure of Indian Money Market? Disadvantage of Money Market? Characteristic features of a developed money Market? Recent development in money market sumary
Next: Money Market: What Is It?

Table of Contents 1) Money Market: Introduction 2) Money Market: What Is It? 3) Money Market: Treasury Bills (T-Bills)

4) Money Market: Certificate Of Deposit (CD) 5) Money Market: Commercial Paper 6) Money Market: Banker's Acceptance 7) Money Market: Eurodollars 8) Money Market: Repos 9) Money Market: Conclusion

Definition
Market for short-term debt securities, such as banker's acceptances, commercial paper, repos, negotiable certificates of deposit, and Treasury Bills with a maturity of one year or less and often 30 days or less. Money market securities are generally very safe investments which return a relatively low interest rate that is most appropriate for temporary cash storage or short-term time horizons. Bid and ask spreads are relatively small due to the large size and high liquidity of the market.

Definition

The money market is the market for short-term financial instruments. Money market instruments include Treasury bills, bankers acceptances, commercial paper, Federal funds, municipal notes, and other securities. The common characteristic of money market instruments is that they all have maturities of one year or less, and often 30 days or less. The money market does not have one fixed physical location. Rather, trading in money market instruments takes place in large financial centers, like New York and London. Companies and investors often use money market securities as temporary "parking places" for storing cash. While the returns on money market instruments are relatively low, they are among the safest of investments. Indeed, most money market securities are considered cash equivalents and are included with cash on a company's balance sheet. A money market fund is a mutual fund that invests in money market securities. While money

market instruments already have low risk, the diversity of instruments in a money market fund provides even greater safety. And although money market funds are not Federally insured, they are highly regulated by the SEC.

Money Market Instrument Definition

The Money Market is an instrument of the fixed income market. Generally speaking, the term "fixed income" is synonymous with bonds. In reality, a bond is just one type of fixed income security. The difference between the money market and the bond market is that the money market specializes in very short-term debt securities (debt that matures in less than one year). Money market investments are also called cash investments because of their short maturities, and their near-liquid nature (almost immediate access upon request). Money market securities are essentially IOU's issued by governments, financial institutions, and large corporations. These instruments are very liquid and considered extraordinarily safe. Because they are extremely conservative, money market securities offer significantly lower return than most other securities. One of the main differences between the money market and the stock market is that most money market securities trade in awfully high denominations. This limits the access of the individual investor. Furthermore, the money market is a dealer market, which means that firms buy and sell securities in their own accounts, at their own risk. Compare this to the stock market where a broker receives commission to acts as an agent, while the investor takes the risk of holding the stock. Another characteristic of a dealer market is the lack of a central trading floor or exchange. Deals are transacted over the phone or through electronic systems. The easiest way for us to gain access to the money market is with a money market mutual funds, or through money market bank account, which are offered at this website.. These accounts and funds pool together the assets of thousands of investors in order to buy the money market securities on their behalf. However, some money market instruments, like treasury bills, may be purchased directly. Failing that, they can be acquired through other large financial institutions with direct access to these markets.