The money market is a term broadly used to refer to markets engaged in the trading of interim securities. It forms only a very small part of the larger investment market. When it comes to investing money in money markets communal funds is a good choice to make.
Money markets offer various options promising maximum returns on your money investments. Are you thinking of investing your money, to double it? If so, your thought process is right on as there are whole ranges of money investment options that bring in varying benefits
So what happens when money market rates fall?
When money market rates fall, the interest paid will be nil or close to nil and new investors will be turned away, leaving a huge impact on corporate-backed funds. Many large companies depend on money market funds for short-term borrowing and when that source dries up, their operations will be badly affected, thus negatively impacting the economy.
What does an increased money market rate imply?
Money market rates increase when the Federal Reserve adopts a restrictive monetary policy which leads to increased cash reserves in the banks. As a result, the banks will be forced to borrow money at higher rates from the Federal Reserve for meeting the excess cash requirement. Consequently, the rates at which the customers borrow money from the banks will also increase; the scenario has a positive impact on the money market rates and money market instruments as well.
Thus, accounts having high money market rates are lucrative. You must open an account with a bank that offers high-interest rates for crediting the proceeds of your investment account. If you choose wisely and make intelligent investments your money account will get you better interest rates.
market communal funds
These are funds that offer you a wide variety of instruments to invest money in commercial paper, repurchase agreements, treasury bills, banker acceptances, federal funds, certificates of deposits/CD etc. If you are looking for conservative low-risk funds, go for treasury bills and federal funds which are secure funds, though low yielding.
