If you are in a confusing state saying, “Why my financial adviser would put so much of my investments in money markets, it seems like a waste of time. Well, this may help you.”
Usually, investing to money market introduces you into a low single digit return as compared to corporate or stocks issues, you a very low principal risk. The money market is a type of financial market which allows you or institutional investors to have a platform in making highly liquids investments. By doing so, you are paving your way into a wider range of opportunities to buy and sell different forms of short-term securities. Having a short-term security with one day or one-year maturity, you get a highly liquid.
When we say ‘money market,” it does not necessary mean that you are investing to a physical market but instead, it offers you informal bank networks where traders are linked via computers, fax machines, and phones. Therefore, the money market is a place where for those that are looking forward investing temporary cash excess into short-term where some companies facing a shortfall of temporary cash can now sell securities or even borrow funds for a short period of time.
So, if you are quite eager to know why your financial adviser put so much effort in placing your investments to the money market, here are the other reasons behind.
Great and safe investment
If you are not sure where to put your investments, investing in money market is a safe haven. Your accounts and funds will have fewer risks where the money market usually is generating a low single-digit return for you for the reason that you are typically investing to low low-risk vehicles namely treasury bills, certificate of deposits and a short-term commercial paper.
No liquidity issue
Generally, the funds from money market do not invest to securities which trade the minuscule volumes but instead, they trade with securities or entities having a high demand. Meaning, there is a tendency for more liquid which you can buy and sell with comparativeness.
Typically, money market funds are paying a bit higher rate of interest compared to the traditional savings or current accounts. For quite some time, the money market is generating a single-digit return which appears quite attractive in the down market.
The money market fund which is tax-free can offer additional improvement if you have a higher bracket of tax and help you prevent generating more taxable income.
No sales charges
Money market offers you less or no sales charges or fee with the associated funds. Since investing to this market, you can buy and sell the funds you are free on how to deposit or withdraw at any time.
So now, with the advantages of investing to market money, surely you feel comfort why is would be great to follow your financial adviser. Instead of living your short-term financial goals, why not invest in money market to ensure that you can be covered and obtain greater benefits from your cash surplus.
Investing to money market can really bring you into an advantageous strategy which has an incredible impact to your ability in building your wealth. If you do not want to miss the opportunity, start talking to your financial adviser and see the difference.