INVESTMENT IN SECURITIES MARKET

Investment in Securities Market

Definition: Investment in securities market involves buying and selling of financial instruments such as stocks, bonds, and mutual funds.
Details: Before investing, it is essential to understand the market and be aware of the risks involved. Investors should evaluate their capacity to handle risk and invest accordingly.

Market Risk or Systematic Risk: The risk of losses due to factors affecting the overall performance of financial markets and macroeconomic factors.
Unsystematic Risk: The uncertainty inherent in a particular company or industry.
Inflation Risk: The chance that the cash flows from an investment won't be worth as much in the future as they are today due to a decline in its purchasing power.
Liquidity Risk: The risk that an investment cannot be bought or sold or converted into cash quickly enough to prevent or minimize a loss.
Business Risk: The risk that a business might stop its operations due to any unfavorable market or financial situation.
Volatility Risk: The risk that stock prices of a company may fluctuate.
Currency Risk: The risk of losing money due to unfavorable movements in exchange rates.

Asset Allocation: A strategy to benefit from diversification of investments into various sectors and companies to mitigate risk.
Systematic Investment Plan: Investing through a systematic investment plan of mutual funds or buying equities directly from the market in smaller lots over a period.

Primary Market: The market where securities are issued by companies for the first time.
Secondary Market: The market where securities are traded after they have been issued in the primary market.
Demat Account: A necessary account for holding securities in dematerialized form.
Trading Account: A necessary account for buying and selling securities.
Savings Account: A necessary account for receiving and paying funds.

Demat Account: A demat account with a SEBI recognized Depository Participant (DP).
Trading Account: A trading account with a SEBI registered stock broker.
Savings Account: A savings account with a commercial bank.

Online Trading Account: Placing orders through a broker's website or mobile app.
Call & Trade Facility: Placing orders through a phone call.
Physically Visiting Broker's Office: Placing orders in person.

Definition: A legal document that contains details of a transaction, such as securities bought/sold, traded price, time of trade, brokerage, etc.
Importance: A contract note is evidence of a trade done by a stock broker and is given to the investor.

Definition: A type of demat account that offers basic services at a lower cost.
Benefits: Nil or low annual maintenance charges, free periodic transaction and holding statements, and two physical statements free of charge.

Definition: A type of investment that pools money from many investors to invest in stocks, bonds, or other securities.
Salient Features: Professional management, diversification, economy of scale, liquidity, simplicity, and tax benefits.

Debt Schemes: Mutual funds that invest in fixed-income securities.
Equity Schemes: Mutual funds that invest in stocks.
Hybrid Schemes: Mutual funds that invest in a combination of debt and equity securities.
Solution Oriented Schemes: Mutual funds that invest in securities with a specific goal, such as retirement or education.
Other Schemes: Mutual funds that invest in other types of securities, such as commodities or real estate.

Definition: A market where contracts for commodities are traded.
Types of Commodities: Agricultural commodities, non-agricultural commodities, and others.
Commodity Price Risk: The risk of price uncertainty that affects the financial position of producers and consumers of commodities.

Farmers: Price volatility, lack of quality storage facilities, need for finance, dependence on local middlemen, and small farm holdings.
Consumers: Price risk, lack of quality commodities, and dependence on local suppliers.

Hedging: A strategy to protect against financial loss or price risk by participating in the commodity derivatives exchange.

Price Discovery: Helps producers and consumers discover prices for a future date.
Price Risk Management: Helps hedge price risk or insure against adverse price movements.

Multi Commodity Exchange of India Ltd (MCX): A major commodity derivative exchange in India.
National Commodity and Derivative Exchange (NCDEX): A major commodity derivative exchange in India.

Forward Contracts: A contract to buy or sell a commodity at a fixed price on a future date.
Futures Contracts: A standardized contract to buy or sell a commodity at a fixed price on a future date.
Options Contracts: A contract that gives the buyer the right, but not the obligation, to buy or sell a commodity at a fixed price on a future date.

Do's: Always consult a SEBI registered investment advisor, invest according to your investment objective and risk appetite, and keep track of your portfolio.
Don'ts: Don't borrow money for investment, don't deal with unregistered brokers, and don't pay more than the agreed brokerage.