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What is difference between money market and capital market?


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Feb 6, 2021
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There are many different kinds of financial markets out there. Money market and capital market are two of those systems. They are both different kinds of markets. Money markets may involve short-term investments. On the other hand, capital markets are large markets that involve high cash flow. So, what are some of the major differences between them?
With the capital market, you are sure that you are making a long-term investment such as buying long-term bonds and not treasury bills. However, the money market gives us the opportunity to have a look at just the short-term investments that can bring you profits.
The main difference between money market and capital market lies in the types of financial instruments traded. Money market deals with short-term debt instruments and securities with maturities up to one year. It focuses on high liquidity and low-risk investments. In contrast, the capital market trades long-term securities like stocks and bonds. It caters to long-term capital raising and investment needs, offering higher potential returns but also higher risk compared to the money market.

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