According to cambridge online dictionary Money
market is the system in which banks and other similar organisations buy
and sell money from each other. Money market is the global financial
market for short term borrowing and lending.
+Money market Funds.
Money market is the global financial market for
short term borrowing and lending.It provides short term funding for
global financial system.It is here the short term financial papers like
commercial paper, treasury bills and bankers acceptance are being
traded. It consists of financial institutions and agents who are
interested in borrowing and lending.Most important feature of this
market is its liquidity. You can buy and sell any time. The trading has
an upward time limit of around 13 months.
Money market funds.
The most important Money market funds are as follows.
Treasury bills
Commercial papers
Certificate of deposit
Inter corporate deposits
Interbank participation certificate
Repo/reverse repo
Call notice/ term money
Money market in India is regulated by RBI and SEBI.
Certificate of Deposit
CDs are similar to savings
accounts in that they are insured and thus
virtually risk-free; they are "money in the bank" . They are different
from savings accounts in that the CD has a specific, fixed term (often
three months, six months, or one to five years), and, usually, a fixed
interest rate. It is intended that the CD be held until maturity, at
which time the money may be withdrawn together with the accrued
interest.
Treasury Bills
Treasury bills (or T-bills)
mature in one year or less. Like zero-coupon bonds, they do not pay
interest prior to maturity; instead they are sold at a discount of the
par value to create a positive yield to maturity. Many regard Treasury
bills as the least risky investment available to U.S. investors.
Advantages of Money Market Funds.
There are many advantages of money market funds. It is considered as a
low risk investment. People who invest here rarely make loss. All funds
switch to money market funds at times to avoid making loss at times of
volatility in the market. Money market funds offers more returns than
the next alternative ie Bank savings.
Disadvantages money market Funds
There
are some dis advantages associated with money market funds too. These
funds are not considered as an investment worthy because the returns
they promise on investments are very low. These works like bank savings
and that makes it less exciting. With more and more new investment
options coming people are getting more attracted towards investments
other than money market funds.
