What are the difference in the money market and capital market?

When buyers and sellers are brought together in a market, this whole process is called the financial market. The prices that are set in this market are then helpful for global trade or capital or the liquidity of the market.

The money market and capital market are some of the main components of the financial market. A financial market is not only for large inverters etc but it also provides a good market for the small market. As both helps to regulate the money inside or outside the country.

The differences

The money market is usually used for short terms like assets that are held up for a short time etc. Government and corporate sectors use the money market as they usually want short term commitments.

The capital market is used for long-term financial matters. These include bonds or a stock that needs longer terms and serves the purpose for a longer time.

Lending and borrowing money

As the money market is of a short time, lending and borrowing take place for short term like for one year. Due to limited time the other requirements get limited time as well

Whereas the capital market, the lending, and borrowing take place for medium and long term.


In the money market, the investors involved are usually financial or central bank companies, etc.

The capital market is a long term investment, it attracts stockbrokers, mutual funds, stock exchange, etc

Nature of investment

In the money market the exchange of money where short term lending and borrowing of money takes place. It’s a high-quality debt security where one year of maturities can be gained.

It a complex market that comprises investors, facilitators, etc. It holds long terms funds like Households, firms, and government. It deals with long term financial claims. It provides all the facilities one needs to get for a long term relationship. It is usually not beneficial for small businesses.


It is obvious from the nature of both the investments that the money markets with a short term of investment provide a low risk of loss. Its a quick and smart decision process. Where you will get benefits in less period which minimizes the risk of losing money.

In the capital market, the profit can be huge and last up to a decade. But if you get a loss in this business, that cannot be repaired soon. Due to the nature of long term investments of the market.

The risk can be minimized in both the terms if you make smart decisions and be accurate about what you are doing and what will be the future goals.


The purpose of investing in short term business is to get a secure and quick profit. It is a safe medium where you invest in easily accessible opportunities with small investments. It has a low risk and low return purpose

The capital market provides a platform for those investors that require big goals. In return, the financial market gets its clients and thus the economy is set to get bigger goals. Thus the mutual relationship benefits both parties on a higher level.