What is Money Market?

Most investors have heard or even invested in money market accounts or money market funds but what exactly is money market? There is more to the money market than just cash or certificates of deposit. We will discuss what is money market below.

What are money markets?

To answer the question of what a money market is, let's examine what the money market actually comprise of. The money market is composed of several individual markets, one for each of its short term credit instruments.

What are the markets in the money market?

In a money market or money market fund, there are markets for:

• Treasury bills

• commercial paper

• negotiable certificates of deposit or CDs

• bankers' acceptances

• commercial bank borrowings

What is a bankers' acceptance?

Bankers' acceptances are drafts drawn on banks to finance international trade on a short term basis.

What is a money market fund?

A money market fund is treated like a cash mutual fund where you have to buy it and liquidate it when you want to sell or redeem for cash. A money market fund is often referred to as just cash because owning a money market fund is similar to owning a high interest checking account. The interest rates on any of the money market funds will not be comparable to owning any securities or mutual funds.