Syndicate
How Why Invest in Money Market
These debt titles or fixed incomes that carry a 1 year maturity or less are generally liquid and safe investments that investors use as emergency funds and / or short term investments. These values are used as a temporary place where to keep funds. The money not used could be invested in the money market to earn a return. These values are low risk investments; lower than stocks and bonds. Nevertheless, in a long term its return is much less than bonds and stocks.
Some related examples from the money market are treasure bonds, trade papers, bills of exchange, deposit certificates, re-buying agreements and money market mutual funds.
Debt Titles:
Debt titles are similar to promissory notes –a debt title is issued when you ask for a loan that will be paid in a specific future date along with regular interests. Maturity of the debt tiles vary broadly. There are debt titles that mature in more than 1 year. In money market transactions and others that mature in less than a year.
Bonds are values issued by the government and corporations which have different maturity dates. Mid term bonds have a maturity between 1 and 10 years while long term bonds can reach maturity terms that go from 10 to 50 years after being issued. Both types of bonds are called money market titles. Long term values that regularly issue payments are US Treasury bonds and notes, US Agency debt tiles, Municipal bonds and corporative bonds issued.
Zero-coupon bonds and re-conversion bonds are debt values of an hybrid type that has different characteristics, but are also considered as money market value titles. They are considered hybrid titles because the zero coupon bonds don’t offer fixed interest amounts as average bonds do. Besides re-conversion bonds can be negotiated for common stocks at the bearers discretion, instead of waiting for its maturity date as in a regular bond.