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With the uncertainty and fluctuations of today’s stock market, many investors are looking for more secure methods of investing their money. Money market investing is one of the strategies that can be used as a conservative but relatively secure investment strategy, and is an interesting alternative to a traditional term deposit or even a high interest savings account.

The money market is effectively a type of fund in which the fund managers invest in a range of short term securities. These can include certificates of deposit, government issued treasury securities, and other financial instruments that generally have a short term or fixed maturity of less than one year. These instruments are referred to as ‘paper’ or ‘commercial paper’

Money market investment is considered a safe strategy for parking your cash, due in part to the liquidity of the securities. However while it is relatively low risk, it is also low reward – hope to stay ahead of inflation but don’t be surprised if you make as little as a few percent return on your investment.

Benefits of money market investing

One of the great benefits of money market investments, apart from their security, is the flexibility with which you can access funds when needed. This is in contrast to fixed term deposits. In fact, many money market funds have an option to write check s against the balance of your fund.

Money market funds also allow purchasers to enter with a relatively low investment.

Points to consider

• Like any fund, investing in the money market will mean paying fees to the fund manager. If you are only parking a small amount of cash, factor these costs into your projected return on investment.
• Low ROI. Despite the uncertainty and risk associated with the share market at present, there are still plenty of good buys. In fact, some argue that there has never been a better time to pick up bargains. By taking the safe route and plunging all cash into low return but secure funds, investors are giving up potential gains.

As with any investment tool, money market investing is a valuable way to reduce the risk associated with a volatile market. However, make it a component of your portfolio while still using some of your cash assets to give yourself the chance of generating better returns.

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