The Money Market
Conclusion and Resources
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 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 broker or 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, and so don't give a high return.
- A certificate of deposit (CD) is a time
deposit with a bank.
- APY takes into account compound interest,
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.
- Bankers' acceptances (BAs) are negotiable
time draft for financing transactions in goods. They are like commercial paper with a bank guarantee.
- BAs are used frequently in international
trade and generally only available to small investors 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 small investors 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.
See also
Disnat's tutorial on Bonds
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