Money markets are the global financing markets that offer short term financing to the investment world. This investments refer to an account held by an investor either individually or as a corporation, for the purpose of short term cash obligations. This ensure that there is regular in and out flow of cash when and if need be.
The purpose of holding the account is to ensure maximum safety for the principal that has been invested in the many different securities in the stock market. In addition, the investment ensures a steady return on the principal amount. The money market investment brings with it a number of advantages and benefits as well. To begin with, it has the potential to make a modest return of two to five percent per year, as a result of the keen investment strategies applied.
Since they are open ended, they present an investor with the opportunity to withdraw or join anytime they like without being penalized. The investments also come with a low risk factor, which is not common to a majority of investments. The probability of one losing their money is relatively low. However, the bigger risk is due to the fact that the investments are not insured and hence, an investor may lose his money if the company he has invested with goes bankrupt.
Other benefits are drawn from the fact that most of the money raised through stocks and bonds are directed into the money market funds and as such, interest and dividends are almost guaranteed for the investors in these investments. Since they are among the most significant in finance, they tend to attract a lot of investors and they have thus become the most widely owned securities.
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