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What is the difference between money market and capital market?

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Quick Answer

Money markets are assets that are used on a short-term basis, while capital markets include long-term investments, according to Investopedia. These markets are used in conjunction by various organizations to oversee risk and liquidity.

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Full Answer

More investors follow capital markets, according to Investopedia, which include equity and the bond market. Corporations and governments may issue bonds in order to raise funds. Companies in capital markets seek to increase capital to support such endeavors as mergers and acquisitions or company expansion.

Investopedia adds that money markets are suitable places for investors to reserve funds for up to one year. These are funds for maintaining operating expenses or meeting payroll obligations. Money markets maintain the necessary liquidity for governments and businesses to operate daily. Elderly people living on a fixed income use money markets because of the low-risk factor, and these markets are safer areas to invest money.

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