Money Market: Introduction
The money market (which I'll occasionally abbreviate to 'MM') is sort of a "safe haven"
for many investors. As the stocks goes up, more money drains from the MM and goes
to stocks. As stocks go down—especially in very large drops—money
funnels its way back into the secure investments. Many investors simply can't
stomach the idea of losing money (which is completely understandable!)
and subsequently put themselves into the safest investment available.
Unfortunately, this is not an entirely intelligent investment decision,
but it happens.
On the other hand, investors who are close to retirement, or already in
retirement, may put large sums of their assets into MM
investments to preserve their assets and maintain the level of income
they need to sustain themselves throughout their golden years. This
approach to investing certainly makes sense for the older investors
don’t have the luxury of riding out steep declines in the market the way
some of the younger ones do.
The MM is actually every bit as complicated as the stock
market, but they tend to be attractive to investors in a down market
simply because they are safer than stocks (plus you really don't have to
know what makes a money market what it is to invest in it). In this
tutorial, we'll cover the variety of securities that make up the MM and the ways that you can invest in these types of securities.
Table of Contents
Money Market: Introduction
- What is a Money Market?
- Treasury Bill (T-Bill)
- Certificate of Deposit (CD)
- Commercial Paper
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