The advantages of money market are rising daily. The market has certain benefits to the investors and the country’s economy as a whole. So, this article explains the advantages of the market.
What is the money market?
The money market is where financial instruments are trading on a short-term basis, usually a year or less. So, it is a market for those participants such as companies, financial institutions, individual investors who want to brow and lend a large sum of money. However, the market is different from the commercial banking system, but it performs supplementary roles to the banking system. Examples of financial instruments to trade on the market include treasury bills, commercial papers, banker’s acceptance, certificate of deposit, and others.
Advantages of money market
Some of the advantages of the money market include:
The market generates higher interest than bank saving accounts within a short period. The interest generated by the market fund is usually compounded every month, making it a profitable investment option.
It involves trading in highly liquid financial instruments that are highly demanded in the market. The high liquidity of it makes it to be relatively easy for investors. The money market fund has 60 days or less than 60 days maturity date on average, and investors are allowed with less or equal to 5% in a single account except for the government securities and repurchase agreements. These arrangements make the market to be highly liquid.
The market safeguards the investors’ fund which makes money market fund to be a low-risk investment option. However, the Securities and Exchange Commission (SEC) allows trading of only financial instruments with the highest credit rating in the market.
The money market fund is regarded as less risky than both bonds and stocks.
It enhances the implementation of monetary policies of a government through the central bank of the country. The government of a country used the market to control the commerce and industry in the country through its central bank.
Operating a money market account gives the owners the ability to access their accounts easily. It gives them the ability to access their accounts online or through ATMs and checks. So, they can easily carry out their financial transactions with their accounts if they are still within the transaction limit of their accounts.
In addition to the ability of the owners to transact with their money easily, they can subscribe to money market funds free of charge as well as redeem money from it free of charge. The transactions fees in the money market are very transparent.
In conclusion, the money market has many advantages and is very important to the growth and development of the economy of every country. However, there is must availability of short funds for the investors to invest in the money market.
Afeez is one of the founding partners of Marasas Consulting limited. He consults for both individuals and entities in the area of accounting, management, audit, tax, and investment. He has a wide range of experience both online and offline which allows him to provide relevant and timely professional advice and assistance to business owners with their accounting, tax, management, audit, and investment plans.
Afeez is a member of the Institute of Chartered Accountants of Nigeria (ICAN) and a member of the Nigerian Institute of Management (Chartered). He is a certified Google analyst and strategist. He earned his Bachelor degree in Management and Accounting from Obafemi Awolowo University, Ile-Ife, Nigeria, and earned an ordinary national diploma in Accountancy from The Polytechnic of Ibadan, Oyo State, Nigeria. He earned certification in “Excel Crash Course” and “Reading of Financial Statement” from Corporate Finance Institute, Canada.
Afeez is dedicated to helping clients achieve business success by helping them to establish solid and sound accounting, tax, and financial processes.