This is not an actual market, but it comes under all the financial institutions (Mutual Fund or Asset Management Companies), which give the Amount of Investors as a loan for a very short period of time, as a loan for the borrowers as Short Term Securities and In return, they charge interest from them. This is the interest, the Return on Investment of Investors.
So, in simple terms, Money Market is basically a network between Traders and different banks, which is interlinked between computers with telephone, fax machine or internet.
Short Term Debts and Securities are bought / sold in Money Market only, known as Money Market Instruments, whose maximum duration can be from 1 day to 1 year and they are very liquefied. That is, these securities can be treated the same as cash, which you can en-cash whenever you want.
Treasury bills, Certificates of Deposit (CDs), Commercial Paper, Bankers Acceptances and Repurchase Agreements are some of the Instruments of Money Market. That is, under the Money Market, it is invested in such securities, which are secured similar to any fixed deposits of a bank, but banks are more liquid and high returns than FDs.
For example, if you do Bank FD, you have an Interest Return at around 7 to 8 percent annually, but if you invest in a fairly Money Market Fund, you need at least 8 You can get more than 10% annual rate, because most of your investment under Liquid Funds is invested in Government Securities and Bonds.
At the same time, there is no maturity period of any Liquid Fund like the bank FD, so you can cash in your Liquid Fund Invested Amount whenever you want, on which you do not feel like an Entry or Exit Load, if you There is a bank FD, which is going to get you interest at the rate of 8 percent after maturity and if you break it before maturity, then you will get an exit load of 1 percent. That is, you are given interest on your deposit money at the rate of only 7% till that day, on the day you broke the bank FD before maturity, then it does not matter that you have done for 1 year The bank broke its FD on the second day or 364th day.
Also, if the interest on the bank FD is taxable, therefore, if you have 20 lakhs of Bank FD, which will get you 16 thousand rupees after one year at the rate of 8%, then the basis of your tax credit rate But you will have to pay tax on this 16000, while depositing Rs 20 lakh for 1 year in the Liquid Fund, there will be no tax on the return of approximately 18 to 20 thousand rupees you receive because Mutual Fund Companies Your Behalf on Your Return Tax has already been paid and you have to pay Tax Free Return The Rapt.
Money Market is essentially very important for businesses because sometimes for a very short period of time the companies need some extra cash, which they get by paying a little bit more interest than the money market, from banks When some extra cash is lost to the companies, then, in the same Money Market, for a short time, they earn some extra return as a loan by giving that cash to another company or Borrower. That is, Money Market is similar to a repository of Short Term Funds.
Liquid Funds / Money Market Funds
These Funds are basically the simplest methods of Money Market, through which a common Investor can invest a very short time i.e. for 1 day and usually there is no Entry / Exit Load on such funds. Also, if you have access to Internet Banking, then you can invest your extra Extra Amount at any of the best Liquid Funds, which you do not need for the next 1 to 3 months, so that you can Get Tax Free Return more than Fixed Deposit sitting at home on Extra Cash.
While banks usually have fixed deposits for a minimum of 1 year, you also have to make the rounds of the bank. Also, Return on FD is not tax free because TDS is deducted and if you withdraw your FD before maturity, then you get an exit load of 1 percent on the interest you get.
If you have the most Secured Debt Investment Instrument after Bank FD, then it is Liquid Fund or Money Market Fund.
Ultra Short Term Funds
Generally, in this type of Mutual Fund Schemes, Mutual Fund companies invest in only those government securities, whose maturity period is less than 1 year and if there is any Highest Secured Debt Investment Instrument after the Liquid Fund, then the Ultra Short Term Fund is the same.
In the Liquid Fund, you invest then, when you have any such extra cash lying in your Bank's Saving Account, which you will not need to be in the next 1 to 3 months. But in addition to your monthly budget, if you have any extra cash available in your Saving Bank Account, which you will not need to be in the next 6 to 12 months, then you can get your free cash in place of Liquid Fund instead of Ultra Short Term You can invest in funds and in this Mutual Fund Scheme, you get a higher return of less than 1 to 2 percent as compared to Liquid Fund Schemes. That is, you can get interest from 9 to 11 percent annually on your investment.
However, in some of these mutual fund schemes, it is important for you to keep your money invested for a minimum of 15 days, which is entirely dependent on the Mutual Fund Scheme in which you are investing.
Floating Rate Funds
These Mutual Funds fundamentally invest in Floating Rate Debt Securities, where the interest paid interest rates vary from time to time depending on the interest rates given in the debt market. Therefore investing in such Mutual Fund Schemes is beneficial only, while Inflation Rate is decreasing, because Inflation Rate is low only if interest rate Increases. Therefore, if the inflation rate increases, then the interest rate decreases, as a result, the return on such funds will be reduced on the Invested Amount.
Since India is an emerging economy, in which the Inflation Rate is going to rise in the coming days, investing in such debt debt is not particularly beneficial for the Indians.