High Yield Money Markets

High yield money markets explained. Learn if this investment strategy is right for you and learn which online companies offer them.

Introduction to High-Yield Money Markets

You’ve probably heard of money markets before. They’re those short-term market investments that allow people to lend and borrow sums of money to be paid back within a short period of time, usually a year or less. The money market is most often used by companies, governments, and various other types of large organizations to help gain sure profits in the short term, but it’s also great for individuals who want to make small investments that pay off in high liquidity.

And while high-yield money markets can be pretty hard to find, having an understanding of how this business works will help you evaluate which tips are good and which are a waste of your investment capital.

Why use the money market?  

The reason for the money market is simple. Let’s say you have some extra money lying around that you’re not doing anything with, and which you’re not going to need any time in the near future. Well, as any smart investor knows, any money that’s sitting round and not doing anything is basically a loss. You need to get that money working for you.

But you can’t just throw your money around anywhere. Especially in today’s economy, it’s important to go for a safe bet. And the money market makes that possible. With the money you invest, you get a sure gain. The only question is how much of a gain you’ll get—and this is the hard part, as high-yield money markets are generally a thing of secrecy in the financial industry.

That’s why it’s a good idea, when talking to brokers or financial advisors, to find one who has a good knowledge of the money market. While other types of investment tend to get more attention, high-yield money markets can be your ticket to long-term growth in your investments.

Types of money market investments 

Summarizing all the instruments that have been put in place to facilitate the functioning of high-yield money markets would be difficult, as every company has its own policy, and money market investment periods can range from anywhere to one day to one year. While the more popular types of money market trading are easy to understand, there are some advanced versions that are only accessible to people who have been in the business a long time.

But if you’re not an expert, and you just want to find something smart to do with your money in the short term, you will come across some terms that are quite familiar. For example, there are money market treasury bills (or T-Bills), that can be easily purchased through the U.S. government. There are also money market mutual funds, commercial paper, or short-term investment pools.

However you choose to invest your money market capital, it’s good to have a certain percentage of your income set aside for this very specialized and potentially lucrative investment strategy. To get started, look into government T-Bills, and once you’re comfortable with them, talk to your financial advisor about more advanced types of high-yield money markets.