moneymarket - Updated 03/24/2006 Money Market Tutorial

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Updated 03/24/2006 Money Market Tutorial http://www.investopedia.com/university/moneymarket/ Thanks very much for downloading the printable version of this tutorial. As always, we welcome any feedback or suggestions. http://www.investopedia.com/contact.aspx Table of Contents 1) Money Market: Introduction 2) Money Market: What Is It? 3) Money Market: Treasury Bills (T-Bills) 4) Money Market: Certificates Of Deposit (CD) 5) Money Market: Commercial Paper 6) Money Market: Banker’s Acceptance 7) Money Market: Eurodollars 8) Money Market: Repos 9) Money Market: Conclusion Introduction Whenever a bear market comes along, investors realize (yet again!) that the stock market is a risky place for their savings. It's a fact we tend to forget while enjoying the returns of a bull market! Unfortunately, this is part of the risk-return tradeoff . To get higher returns, you have to take on a higher level of risk. For many investors, a volatile market is too much to stomach - the money market offers an alternative to these higher-risk investments. The money market is better known as a place for large institutions and government to manage their short-term cash needs. However, individual investors have access to the market through a variety of different securities. In this tutorial, we'll cover various types of money market securities and how they can work in your portfolio. What Is It? (Page 1 of 7) Copyright © 2006, Investopedia.com - All rights reserved.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Investopedia.com – the resource for investing and personal finance education. The money market is a subsection of the fixed income market. We generally think of the term fixed income as being synonymous to bonds . In reality, a bond is just one type of fixed income security. The difference between the money market and the bond market is that the money market specializes in very short- term debt securities (debt that matures in less than one year). Money market investments are also called cash investments because of their short maturities. Money market securities are essentially IOUs issued by governments, financial institutions and large corporations. These instruments are very liquid and considered extraordinarily safe. Because they are extremely conservative, money market securities offer significantly lower returns than most other securities. One of the main differences between the money market and the stock market is that most money market securities trade in very high denominations. This limits access for the individual investor. Furthermore, the money market is a dealer market , which means that firms buy and sell securities in their own accounts, at their own risk. Compare this to the stock market where a broker receives commission to acts as an agent, while the investor takes the risk of holding the stock. Another characteristic of a dealer market is the lack of a central trading floor or exchange . Deals are transacted over the phone or through electronic systems. The easiest way for us to gain access to the money market is with a
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 7

moneymarket - Updated 03/24/2006 Money Market Tutorial

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online