The money market - Parking Your Funds

There are times when you may simply want to park your funds. For instance, if you have some money that you would like to invest in the stock market but are waiting for the right time, you may want to keep the money liquid. Or, you may have the need for that money in the next few months and don't want to put it any investment since it might conceivably go down by the time you need the money. In such cases, you may simply park your funds while at the same time collecting as high a return on your funds.

Investing in money markets is an good way to stay liquid and earn a (relatively) higher interest rate.

Money market investments include T-bills (lending money to the government), CDs (lending money to banks), and Commercial Paper (lending money to businesses). T-bills are the most common form of money market investments.

Most of these investments require a large minimum, such as $25,000, although smaller investments (such as $5,000 or even $1,000) will be accepted in some instances. Smaller deposits, however, command a lower interest rate. (See the accompanying table for recent rates.)

How to find out more

If you want to invest in any money market instrument, you should contact your broker. Current money market rates are regularly quoted in the financial press.

Annual yields of money market instruments as at mid-December 2002

                           1 month  3 months    6 months
                             (%)      (%)         (%)

T-bill                      2.69      2.79        3.01
Commercial paper            2.78      2.85         --
Banker's acceptance (CD)    2.78      2.86         --