Money Market Instruments In Pakistan
Whenever a bear market comes along, investors realize that the stock market is a risky place for their savings. But to get higher returns, we have to take on a higher level of risk. For many investors, a volatile market is too much to stomach. On the other hand 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.
What is Money Market?
The money market is a subsection of the fixed income market .By fixed income market we mean the bond market. We generally think of the term fixed income as being synonymous to bonds. But in reality, a bond is just one type of fixed income security. Differentiating between the money market and the bond market we see 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 denomination which limits the 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. Comparing this with the stock market we see that it is market where a broker receives commission to acts as an agent, while the investor takes the risk of holding the stock. Another...