What is the Money Market?

Answer:
You’ve heard of fixed income investments such

as bonds, right? The money market is similar to the bond market in that it offers fixed income investments. The investments in the money market mature in less than one year. These securities are like IOUs issued by the government, corporations, and financial institutions with an extremely short maturity date.

The money market is quite liquid and low-risk. Low-risk investments such as those found in the money market come with a price: low returns. In fact, money market securities offer some of the lowest returns in the financial sector.

How do you invest in the money market? Usually, you buy into the money market through a money market mutual fund or money market bank account. These funds or accounts pool the money of many investors and buy the money market securities on the group of investors’ behalf. You can also purchase some money market securities such as Treasury Bills directly.

Other types of securities found in the money market include Certificates of Deposit, commercial paper (unsecured short term loans issued by corporations), bankers acceptances, and repurchase agreements.


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