Finance is a broad field with various specializations, including investment banking, financial planning, risk management, budgeting and many more. This diversity allows you to find a niche that aligns with your interests and skills. Finance professionals play a vital role in shaping a company's financial health, investment strategies, and overall success, giving them a sense of significance in the business world. It encompasses the study of various financial instruments, including stocks, bonds, options, and futures. These instruments are actively traded in the capital market, making a deep understanding of finance essential for participants in this market.
Finance experts regularly analyze the performance of the capital market, including tracking stock indices, bond yields, and commodity prices. This analysis informs investment decisions, asset allocation, and risk management strategies.
Capital market- It is the market where an individual can buy or sell (trade) the financial products. These products mainly include stocks ,bonds and other financial assets.
- There are various suppliers and users of this market .
- suppliers of the market includes - institutions, households, life insurance company and non- financial companies.
- users includes- non-financial companies, government financing, infrastructure investment and operating expenses.
- Capital market includes these two types of market-
Primary market
It is the market where new securities are initially issued and sold to investors for the first time. This is often done through initial public offerings (IPOs) for stocks or bond offerings by governments or corporations.
Investors who wish to participate in the
primary market purchase these newly issued securities directly from the issuer or underwriter. They pay the offering price set by the issuer.
Secondary market
It is the market where securities that were previously issued in the primary market are bought and sold among investors. It's often referred to as the stock market or bond market.
In this,the securities which are traded on various exchanges or over-the-counter (OTC) platforms. Intermediaries such as stockbrokers and market makers facilitate these transactions.
Investors buy and sell securities in the secondary market to other investors. Prices are determined by market supply and demand, and they can fluctuate based on various factors, including company performance and economic conditions.
Unlike the primary market, where issuers raise capital directly, in the secondary market, the buying and selling of securities occur among investors. Issuers do not receive funds from these transactions; instead, they may benefit indirectly from a strong secondary market by potentially attracting more investors to their primary market offerings.
Shares (Stocks):
Shares, also known as stocks or equities, represent ownership in a company. When you own shares of a company, you are a shareholder and have a claim on a portion of the company's assets and earnings. Shareholders typically have voting rights and may receive dividends, which are a share of the company's profits.
Bonds:
Bonds are debt securities issued by governments, municipalities, or corporations to raise capital. When you buy a bond, you are essentially lending money to the issuer. In return, the issuer promises to pay you periodic interest (coupon payments) and return the bond's face value (principal) at maturity. Bonds are considered less risky than stocks and are often used for income generation and capital preservation.
Securities:
Securities are broadly defined as financial instruments that represent a financial value or ownership interest. This term encompasses a wide range of assets, including stocks, bonds, options, futures contracts, and more. Securities can be bought and sold in financial markets.
Financial Assets:
Financial assets are any assets that have economic value and can be traded or sold in the financial markets. They are a broader category that includes not only stocks and bonds but also cash, bank deposits, certificates of deposit (CDs), mutual funds, and other investments. Financial assets serve as a means to store and transfer value.
Demat account
A Demat account, short for "Dematerialized account," is a digital repository that holds your financial securities in an electronic or dematerialized form. It's used primarily for the convenient and secure storage of various financial instruments like stocks, bonds, mutual fund units, and Exchange Traded Funds (ETFs).
How to Open a Demat Account:
Choose a Depository Participant :
A DP is an authorized entity registered with a depository like NSDL OR CDSL to provide Demat services. Select a DP based on factors like budget,fees, services, and reputation.
Complete Application:
Visit the website of your chosen DP and fill out the Demat account opening application form. You'll need to provide personal details, proof of identity, proof of address, and bank account information.
Submit Required Documents: Along with the application form, submit the necessary documents such as PAN card, Aadhaar card, passport-sized photographs, and a canceled cheque or bank statement as address proof.
Verification:
Your DP will verify the documents and your application. This may include in-person verification or video KYC, depending on the DP's policies.
Agreement and Charges:
Review the terms and conditions, and understand the fees associated with the Demat account. Sign the agreement with the DP.
Receive Account Details:
Once your application is approved, you'll receive a Demat account number and login credentials to access your account online.
Link Bank Account:
Link your Demat account with your bank account to facilitate seamless fund transfers for trading.
0 Comments