When did money market come into existence and how did it start?

Money Markets have long been in existence. The start of money market dates back as far as four decades ago; although only a few people are aware of it. To learn about the history of money markets will allow us to take a closer look at the changes that went with it since their introduction during the latter part of the 20th century.

The money market fund was first introduced into the market in the 1970s.  The following year, the first market fund had been established. The popularity of money markets to investors started to soar high during the early 1980s. This is attributed to their high liquidity, high yields, and relative safety. Investment in money-markets dramatically increased from $20 billion during the late 1970s, after three years, it rose to$300,000 and then to more than $150 billion during the early 1980s. Much of the growth came at the expense of banks and thrift institutions. The recession of the late 1980s and early 1990s had caused the interest rates and the fund’s popularity to drop. By the year 1999 more than $800 billion was already invested in U.S. money-market funds.

The popularity of these funds was attributed to their accessibility to small businesses who can’t afford to make large investments. This had usually limited them to T-bills that often required an average $10,000 – $12,000 investment as compared to certificate of deposits that require $100,000.The fund has created higher ROIs that encouraged the investment of larger amount of money. This has also allowed the investor to withdraw though writing checks instead of having to personally go to the bank.

The original Reserve Fund was designed for zero market risk. The idea was to give investors immediate liquidity and safety for their money above all else. The money market fund was created to provide effective cash management, a dollar back for every dollar invested and beyond that a reasonable rate of return.