How to invest in the money market ?

Money market or also called majority, are important components in the financial economy of each country. They traded instruments with low risk, from both the creditworthiness of their issuers (public debt and large financial institutions or industrial) and provide additional guarantees (government or commercial paper). As they become tools of investment, safe, with good yields and liquid, and are issued with short maturities.

The negotiation of the assets (bonds or notes) in the currency markets can be made directly with the broadcasters, but the common thing that is done through specialized intermediaries (banks or brokerage firms).

The money market facilitates financing short-term debt issuers (government, large financial institutions or industrial), i.e. assets are traded at low risk and high liquidity which makes them very attractive for investors seeking short term productivity.

Reasons for investing in money markets

• Investments with high liquidity and safety. The existence of secondary markets, large and powerful, ensures quick and easy trading of securities or assets.

• The flexibility that states this market is reflected in the interest offered, as well as the high trading volume of assets.

• Recognized as wholesale markets, key players are large financial institutions or industrial companies that traded large volumes of financial resources. So you can consider that this option is for investors in medium to high level.

• Negotiation can be made directly between participants or through specialized intermediaries, which facilitates access to any investor who has the volume needed for this type of transaction.

Participating financial institutions as intermediaries are:

Commercial Banks

Function as institutions to fulfilling the objective of analyzing the financial position of the stations to avoid possible investor uncertainty. Also act as issuers of debt to assets provide the general public.

A significant proportion of their liabilities are made up of deposits or securities, which are cash, as mentioned above.

These banks operate in the money market in order:

1. To maintain liquidity and solvency of the bank.

2. Maximum possible return on surplus funds, bearing in mind the constraints imposed by the previous target.

3. Maximum productivity of its resources to borrow the necessary funds at the lowest cost possible.

Central Banks
Through these banks, the government in most countries regulates the nation's monetary system, including banking. These institutions not only money but also print directly involved in the mainstream market.

As an account holder

Any person or entity, holder of a checking account at a bank may participate in the money market, obtaining a term deposit or pay the government. There are several options for investors that provided by financial intermediaries. Understand the role of different participants in this financing option will be the beginning to make inroads in the money market successfully.

Happy investing

Related Post