Understanding Differences Between Money Market and Capital Market

Ngopisantuy.com Understanding Differences Between Money Market and Capital Market, In general the market that some people are familiar with is just a traditional market, a location where products and services may be sold directly.

However, there is an abstract market in which no commodities or services are sold, but instead capital or money is utilized as a commodity.

Understanding Differences Between Money Market and Capital Market, The market is also known as the money market and the capital market. But what is the distinction between the money market and the capital market?

Understanding Differences Between Money Market and Capital Market

Perhaps regular people’s ears are still strange to them when they hear about the money market or capital market. This does not, however, apply to those business players. The capital and money markets are typically areas where transactions take place, but the objects are different.

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not consumer products like those supplied in mainstream marketplaces Securities are the product being offered. The goals vary as well, ranging from long-term to short-term investments, as a source of working capital funding, and to manage the quantity of money in the community.

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To grasp and appreciate the distinction, you must first identify the definition of the two terms. The capital market is a location where you may purchase and sell short-term securities. In the meanwhile, the money market can be used to purchase and sell short-term securities.

It genuinely represents the distinction between the capital market and the money market after comprehending the definition of the two. Of fact, the distinction is not that easy; the following will explain in further detail.

The distinction between the money market and the capital market

As previously stated, the money market is a market mechanism that enables individuals to conduct transactions through banks or non-bank financial securities firms.

The money market may also be defined as a location where a party or individual can borrow cash at an interest rate as a reward or advantage to the lender.

Transactions in the money market can be carried out alone or through an intermediary or broker. Fund loan transactions in the money market are completed in a short period of time, ranging from one day to a maximum of one year.

The money market uses numerous instruments in its operations; usually, these instruments Imply are issued in the form of securities The following are some examples of securities that can be exchanged on the money market:

  • Securities in the Money Market (SBPU).
  • Certificate issued by Bank Indonesia (SBI).
  • Deposit
  • Notes Promissory.
  • Treasury Notes
  • Acceptance from a bank.
  • Paper for business.
  • Money should be called.

While the capital market itself, in general, is a meeting ground for investors and issuers. In the capital market, investors are parties who have funds, whereas issuers are persons who often originate from business entities that demand financing.

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Long-term funding is more likely to be found in the capital market. As a result, the capital market’s instruments are often stocks, bonds, mutual funds, or other securities. Aside from it, the capital market has additional tools such as exchange traded funds.

Exchange-traded funds (ETFs) and derivatives

After you’ve figured out what the money market and capital market represent, look for the distinctions between the two, along with an explanation.

1. Time Period Differences in the Money and Capital Markets

Despite the fact that they both provide futures financing transactions, the money market and the capital market have different timelines.

The money market may be a meeting ground for fund owners and borrowers. This gathering frequently corresponds with the offer of short-term deals.

Meanwhile, the capital market provides long-term investment opportunities to investors through the instruments that have been made available. Despite variations in timeline, both the money market and the capital market are controlled by specialists. who can assure the seamless operation of your investment activity

2. Differences in the Money and Capital Markets Based on Instrument Selection

Bank Indonesia Certificates (SBI), certificates of deposit, Money Market Securities (SBPU), Commercial Securities (CPs), Banker’s Acceptance (BA), and State Treasury Bills are among the products available in the money market (SPN).

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Meanwhile, the capital market offers debt securities (bonds), equities (stocks), mutual funds, derivative products, and other things.

3. Institutional Differences in the Money and Capital Markets

The money market and the capital market serve the same economic role, but they differ in terms of the institution or the top supervisor.

If the central bank regulates the money market, as it, Bank has control over the money market. The Ministry of Finance of the Republic of Indonesia is the top authority in the capital market.

Author: Irdansyah
I'm a regular contributor to IRDANSYAH commander, and in my business blog, my team and I share tales on the experience of starting a business from zero, how it feels to build a startup, and how to scale-up.