Monetary Investment. We speak of monetary investment when the capital is invested in short-term media. Deemed less risky, this type of savings is often adopted to take advantage of the market without being exposed to possible considerable losses of capital. But what is it exactly?
What is the Money Market?
It designates a short-term market where the country’s major players exchange securities as an investment or as a loan for a temporary financing solution. The government, banks, fund managers, the ECB, insurance companies, etc. are concerned by this operation.
Several media are available in this market. But some of the most common are treasury bills, unsecured interbank loans, repos, and certificates of deposit. In principle, the money market is made up of two distinct fields of application:
The Interbank Market
It is only accessible by credit institutions. In this area, the latter lend each other liquidity to be able to grant more credit to their customers. Only a part of the loans granted by the banks are represented in their capital reserve. However, to control the indirect monetary creation carried out by primary banks, the central bank requires a minimum capital called: the reserve requirement.
To obtain more liquidity, financial institutions fill the deficit with the cash surpluses of their competitors. It is the ECB that organizes the exchange of the tender for the distribution of the accumulated funds. The reference rates for quotation are Euribor and Libor;
The debt securities market
It is open to all major economic players who wish to operate in the short-term capital market. The products traded there are essentially TCNs (or negotiable debt securities). Among the latter, we can enumerate the bonds of financial companies, the commercial paper, the treasury bills in the current account.
What is Monetary Investment?
It is an investment intended to make the funds grow in the short term, so it is more “safe”. So, it is not surprising to know that its deadline can be fixed at a few months. Among the most used, we can list term accounts, super passbooks, and regulated passbooks such as passbooks, LDDs or sustainable development passbooks, etc. This list also includes the PEL or home savings plan and its congeneric the CEL or home savings account. Apart from that, there are monetary SICAVs and certificates of deposit.
In addition, you should know that these savings products, unless they are regulated, are not without risks. Indeed, monetary investments can sometimes involve significant risks since all capital markets are subject to fluctuations. To assess the level of risk, it would be best to seek the advice of an industry professional as a credit market. Thanks to his know-how, the broker is able to direct his client towards the more interesting alternatives according to the news of the money market.
Monetary SICAVs: monetary investment on the decline
It is a savings product managed by professional managers, which is invested collectively in short-term financial instruments. Thus, the subscriber frees himself from management and benefits from the know-how of a competent expert.
The principle is simple, the profits generated by the common fund are shared between the investors up to their participation. Unlike savings accounts, this investment is capitalized on a daily basis, but not every fortnight. In other words, the products are injected into your account on a daily basis.
The rate is revised regularly according to short-term benchmarks such as the three-month Euribor or the Eonia. The performance of the investment is then evaluated according to the evolution of the opportunities offered by the money market. For short-term investments, this daily revaluation system can be advantageous, however at a time when interest rates are at their lowest, this type of investment is losing ground.