The money market is part of the financial market where the investors make use of financial instruments with short-term maturities, and higher liquidity is traded. It is used for selling and buying of securities of short-term maturities like commercial papers and treasury. Examples of the money market are mutual funds, and municipal funds and account can be open in most banks. On the other hand, in the capital market, sellers and buyers are involved in the trade of financial securities, such as stocks and bonds. The capital market comprises of secondary and primary markets. The secondary market refers to trading existing securities, whereas primary markets trade in current issues of stocks.
The company participates in money marketing to raise funds, for it is safe to invest in the money market because of the significant liquidity of securities. The returns in the money markets are lesser, but its advantages it has a variety of products. Institutions and individuals can participate in the capital market. In the money market company invests in raising funds from short-term trading. In the capital market, participants channel excess funds to the financial institution that invests in their behalf, including long-term securities. In the capital market, trading is regulated, and things are done informal way. However, in the money market, the deals are done informally for no guiding structure or written regulations.
The critical activity of the money market is to facilitate governments and businesses to get money to function at a reasonable cost and support the proper liquidity level. Individuals can save their money in money markets because it provides a safe and accessible form of saving, and saving is loaned to government and business on their behalf by money market fund. Because trading movements in capital markets are analyzed and monitored, this gives an image of how a healthy economy is doing.