Capital Market, Money Market

The capital market encompasses the trade in both stocks and bonds. These are long-term assets bought by financial institutions, professional brokers, and individual investors.

The capital market is where stocks and bonds are traded. Its movements from hour to hour are constantly monitored and analyzed for clues to the health of the economy at large, the status of every industry in it, and the consensus for the short-term future.

The overriding goal of the companies institutions that enter into the capital markets is to raise money for their long-term purposes, which usually come down to expanding their businesses and increasing their revenues. They do this by issuing stock shares and by selling corporate bonds.

Money Market

The money market is the trade in short-term debt. It is a constant flow of cash between governments, corporations, banks, and financial institutions, borrowing and lending for a term as short as overnight and no longer than a year.

The money market is a good place for individuals, banks, other companies, and governments to park cash for a short period of time, usually one year or less. It exists so that businesses and governments that need cash to operate can get it quickly at a reasonable cost, and so that businesses that have more cash than they need can put it to use.

 Capital market

 Money market

 Liquidity  Capital market securities are considered liquid because of stock exchange but compared to money market instruments these are less liquid.  Money market securities enjoy higher degree of liquidity.
 Investment outlays  The investment in capital market does not require huge financial investment  The money market instruments are quite expensive so huge financial investment is required.
 Participants  Thee participants of capital market are financial institutions, banks, public and private companies, foreign and ordinary retail investors from public.  Thee participants of money market are banks, private and public companies but foreign and ordinary retail investors do not participate in money market.
 Safety  The instruments of the capital market are riskier.  The instruments in the money market are safe and less risky due to short duration.
 Instruments  The instruments dealt in this market are bonds, debentures, equity shares and stock.  The instruments dealt in the market are bills of exchange, treasury bills, banker’s acceptance, etc

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