Money Market

Investments

The money market is the market for short-term borrowing and lending instruments with maturities up to 1 year -- treasury bills, commercial paper, certificates of deposit, and call money. Money market mutual funds invest in these instruments.

In detail

Money market instruments:nTreasury Bills (T-bills): Government of India, 91/182/364 days, zero credit risk, 6.8-7.2% yieldnCommercial Paper (CP): corporates, up to 1 year, credit risk variesnCertificates of Deposit (CD): banks, up to 1 year, AAA-ratednCall money: overnight lending between banks at call money ratennMoney market funds: invest in these instruments, offer better returns than savings accounts (6.5-7.5%), very low risk, T+1 liquidity.

Real-life example

🇮🇳 India example

Anand has Rs 5L spare for 3 months before property purchase. Instead of leaving in savings account (3.5%), he invests in a money market fund (7.2%). Over 3 months: savings account gives Rs 4,375, money market fund gives Rs 9,000. Difference: Rs 4,625 for zero extra effort.

Frequently asked questions

Money market fund vs liquid fund -- what is the difference? ▼

Liquid funds invest in instruments up to 91-day maturity. Money market funds can invest up to 1-year maturity. Money market funds generally offer slightly higher returns with marginally more interest rate sensitivity. Both are very low risk.