We hope this tutorial has given you an idea of the securities in the money market. It's not exactly a sexy topic, but definitely worth knowing about, as there are times when even the most ambitious investor puts cash on the sidelines.
- The money market specializes in debt securities that mature in less than one year.
- Money market securities are very liquid, and are considered very safe. As a result, they offer a lower return than other securities.
- The easiest way for individuals to gain access to the money market is through a money market mutual fund.
- T-bills are short-term government securities that mature in one year or less from their issue date.
- T-bills are considered to be one of the safest investments - they don't provide a great return.
- A certificate of deposit (CD) is a time deposit with a bank.
- Annual percentage yield (APY) takes into account compound interest, annual percentage rate (APR) does not.
- CDs are safe, but the returns aren't great, and your money is tied up for the length of the CD.
- Commercial paper is an unsecured, short-term loan issued by a corporation. Returns are higher than T-bills because of the higher default risk.
- Banker's acceptances (BA)are negotiable time draft for financing transactions in goods.
- BAs are used frequently in international trade and are generally only available to individuals through money market funds.
- Eurodollars are U.S. dollar-denominated deposit at banks outside of the United States.
- The average eurodollar deposit is very large. The only way for individuals to invest in this market is indirectly through a money market fund.
- Repurchase agreements (repos) are a form of overnight borrowing backed by government securities.
InvestingFind out whether stocking your money in these accounts will stand up to the test of time.
InvestingIf you need liquidity and safety on a sum of money, don't forgo potential interest by keeping the funds as cash.
InvestingThis investment vehicle is often the perfect stop-gap measure for growing your money.
InvestingThe U.S. government has two primary methods of raising capital. One is by taxing individuals, businesses, trusts and estates; and the other is by issuing fixed-income securities that are backed ...
InvestingA time deposit is an interest-bearing bank deposit that has a specific maturity date.
InvestingThese funds are noted for their safety in a rough market. Read on to find out why.
InvestingThis investment provides security, but its returns may not be adequate for long-term investors.