So. I’ve been out of it for awhile, but I’m back now, and I’ll be making appearances here as I can. At the moment I have little or no free time, between work and planning my upcoming wedding. Which reminds me I still need a guest list. So without any further non-sense let’s get into this, and I’ll try and make something that’s rather drab and boring as informative and interesting as I can.
Last week Chris talked about the bond market. This week I’ll be talking briefly about the money market.
The money market and bond market are similar in that they are both low risk, low return investments. But differ greatly in both the term of the investments and their liquidity as well. The money market, is in most cases much easier to withdraw from, and generally has terms that are under a year in length.
There are a number of different options to examine when looking at investing in the money market. However a number of them are only accessible to we the common folk, by investing in a Money Market Mutual Fund, or a Money Market Account. Just in case your curious those investments are as follows: Repos, Bank Assurances, and Eurodollars. What are they? Repos are basically loans that are garaunteed by a bond. Bank Assurances, are generally used by those of us who are Importer-Exporters ;-), but in all seriousness are used for the importation and exportation of goods in most cases. Meanwhile Eurodollars are CDs held at foreing banks, and are generally counted in the millions of dollars invested. Leaving them out of reach for most of us as individuals.
Others however we have direcy access to, the already mentioned Money Market Mutual Funds, and Money Market Accounts. But there are others as well, including T-Bills and CDs. Most of us are familiar with CDs, they’re basically loans made from purchaser, us, to a seller, generally a bank. The seller agrees to pay a certain APR to us for the use of our money. The major disadvantage to CDs being that there is a hefty fine for withdrawing from them before they reach maturity. T-Bills can be thought of as bonds that will mature in less than a year.
That’s pretty much all there is too it. For me, it’s not a terrible attractive investment as the returns aren’t as good as I can find elsewhere. But, the low risk and highly liquid nature of these investments make it a great fit to put those rainy day funds. Why let any money sit idle when it can do work for you?
Till next time.