Question

Distinguish between money market securities and fixed income securities

Answer 1

Money Market

The money market is part of the fixed-income market that specializes in short-term debt securities that mature in less than one year. Most money market investments often mature in three months or less. Because of their quick maturity dates, these are considered cash investments. Money market securities are issued by governments, financial institutions, and large corporations as promises to repay debts. They are considered extremely safe and conservative, especially during volatile times. Access to the money market is typically obtained through money market mutual funds or a money market bank account. The assets of thousands of investors are pooled to buy money market securities on the investors’ behalf. Shares can be bought or sold as desired, often through check-writing privileges. A minimum balance is typically required, and a limited number of monthly transactions are allowed. The net asset value (NAV) typically stays around $1 per share, so only the yield fluctuates.