This is a conversation that happened between me and a friend last weekend:
Me: Have you heard of a money market before?
My Friend: Money Markets. Is it a market where they sell money? Is it the stock market?
Me: Clearly, this is going to be the topic of my next article.
Introduction
Before we enter the world of money markets, why do we run away when we hear finance terminologies thrown around? Is it out of fear? Shouldn’t we ask ourselves why we trust people who understand these ‘big’ words to handle our money (the banks) but somehow, we don’t think we should actually know what they do with it? That’s a story for another day.
We’ve come to realise that very few adults actually know anything concrete about financial markets, how much more the Money Market.
Moving ahead, it is now 2022. The year of the personal finance apps. Because of these apps, a lot of information about money is no longer hidden in a dark tower on top of the highest mountains of Narnia; it is all at your fingertips. Today however, we’ll zero-in on the money market.
What Is The Money Market?
The money market is simply a trade in short-term loans between the government, banks and other financial institutions. It is not the stock market. By buying into the Money Market, you essentially lend your money to the pool of funds from which these institutions can borrow. The money you lend, earns you a daily interest.
Depending on the type of money market fund you buy, the terms of repayment, interest rates and so on vary.
Money Markets are popular because one can invest small amounts, keep the cash flowing(liquidate) at anytime you choose to quit and is pretty low risk. A lot of first-time investors are usually advised to go this route before they build a stronger risk appetite.
How Do You Get Involved?
Most Asset Managers have predefined Money Market Funds. They have low barriers to entry, some as low as 2000NGN. Once you’re signed up with them, you can start investing right away, earn your daily interest, and stop whenever you need to.
Who Can You Buy Money Market Units From?
Here in Nigeria, the two most notable Asset Managers are Investment One and AXA Mansard. You can invest with them online from any mobile internet-enabled device. Easy peasy lemon squeezy.
These guys take your investment, analyse the market for you and put your money where you can maximise profit on your principal.
In conclusion, you need not fret because you think you’re too young or not in the finance industry to learn about investing when those who know are having a conversation and you can’t keep up. Compare money markets to Balogun market in Lagos if you will. It is still buying and selling, only this time, you’re buying and selling money.
At REACH, we are in the business of finance education and empowerment. So to see more articles where you can learn more like this, stick to this page.
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