Download to read offline
![The Securities Contract (Regulation) Act, 1956 [SCRA]
defines ‘Stock Exchange’ as any body of individuals,
whether incorporated or not, constituted for the purpose of
assisting, regulating or controlling the business of buying,
selling or dealing in securities. Stock exchange could be a
regional stock exchange whose area of operation/jurisdiction
is specified at the time of its recognition or national
exchanges, which are permitted to have nationwide trading
since inception. NSE was incorporated as a National Stock
Exchange.](https://image.slidesharecdn.com/investmentbasics-220510180935-b8ba118b/85/Investment-Basics-pptx-21-320.jpg)
![The Securities Contract (Regulation) Act, 1956 [SCRA]
defines ‘Stock Exchange’ as any body of individuals,
whether incorporated or not, constituted for the purpose of
assisting, regulating or controlling the business of buying,
selling or dealing in securities. Stock exchange could be a
regional stock exchange whose area of operation/jurisdiction
is specified at the time of its recognition or national
exchanges, which are permitted to have nationwide trading
since inception. NSE was incorporated as a National Stock
Exchange.](https://image.slidesharecdn.com/investmentbasics-220510180935-b8ba118b/75/Investment-Basics-pptx-21-2048.jpg)
![Investment ppt[1].pptx [autosaved]](https://cdn.slidesharecdn.com/ss_thumbnails/investmentppt1-pptxautosaved-120507003432-phpapp02-thumbnail.jpg?width=600ounds&width=560&fit=bounds)
Investment Basics.pptx
- 2. What did youunderstand from this picture? Let’s Discuss
- 3. Objectives You will beable to classify the causes of Investment. You will be able to Interpret and Exemplify the tools of investment You will be able to explain the need of investment.
- 4. What is Investment? The moneyyou earn is partly spent and the rest saved for meeting future expenses. Instead of keeping the savings idle you may like to use savings in order to get return on it in the future. This is called Investment.
- 5. Why should oneinvest? 1. Earn return on your idle resources 2. Generate a specified sum of money for a specific goal in life 3. Make a provision for an uncertain future.
- 6. One of theimportant reasons why one needs to invest wisely is to meet the cost of Inflation. Inflation is the rate at which the cost of living increases. The cost of living is simply what it costs to buy the goods and services you need to live. Inflation causes money to lose value because it will not buy the same amount of a good or a service in the future as it does now or did in the past. For example, if there was a 6% inflation rate for the next 20 years, a Rs. 100 purchase today would cost Rs. 321 in 20 years
- 7.
- 9. When to startInvesting? The sooner one starts investing the better. By investing early you allow your investments more time to grow, whereby the concept of compounding (as we shall see later) increases your income, by accumulating the principal and the interest or dividend earned on it, year after year. The three golden rules for all investors are: Invest early Invest regularly Invest for long term and not short term
- 10. What care shouldone take while investing? 1. obtain written documents explaining the investment 2. read and understand such documents 3. verify the legitimacy of the investment 4. find out the costs and benefits associated with the investment 5. assess the risk-return profile of the investment 6. know the liquidity and safety aspects of the investment 7. ascertain if it is appropriate for your specific goals 8. compare these details with other investment opportunities available
- 11. 9. examine ifit fits in with other investments you are considering or you have already made 10. deal only through an authorised intermediary 11. seek all clarifications about the intermediary and the investment 12. explore the options available to you if something were to go wrong, and then, if satisfied, make the investment. These are called the Twelve Important Steps to Investing.
- 13. What is meantby Interest? When we borrow money, we are expected to pay for using it - this is known as Interest. Interest is an amount charged to the borrower for the privilege of using the lender’s money. Interest is usually calculated as a percentage of the principal balance (the amount of money borrowed). The percentage rate may be fixed for the life of the loan, or it may be variable, depending on the terms of the loan. What factors determine interest rates? There are different types of interest rates -rates that banks offer to their depositors, rates that they lend to their borrowers, the rate at which the Government borrows in the Bond/Government Securities market, rates offered to investors in small savings schemes like NSC, PPF, rates at which companies issue fixed deposits etc. The factors which govern these interest rates are mostly economy related and are commonly referred to as macroeconomic factors. Some of these factors are:
- 15. Demand for money Levelof Government borrowings Supply of money Inflation rate The Reserve Bank of India and the Government policies which determine some of the variables mentioned above What are various options available for investment? Physical assets like real estate, gold/jewellery, commodities etc. and/or Financial assets such as fixed deposits with banks, small saving instruments with post offices, insurance/provident/pension fund etc. or securities market related instruments like shares, bonds, debentures etc.
- 16. Activity Calculate Bank andPost Office Deposits.
- 17. What are variousshort-term financial options available for investment? Savings Bank Account is often the first banking product people use, which offers low interest (4%-5% p.a.), making them only marginally better than fixed deposits. Money Market or Liquid Funds are a specialized form of mutual funds that invest in extremely short-term fixed income instruments and thereby provide easy liquidity. Unlike most mutual funds, money market funds are primarily oriented towards protecting your capital and then, aim to maximise returns. Money market funds usually yield better returns than savings accounts, but lower than bank fixed deposits. Fixed Deposits with Banks are also referred to as term deposits and minimum investment period for bank FDs is 30 days. Fixed Deposits with banks are for investors with low risk appetite, and may be considered for 6- 12 months investment period as normally interest on less than 6 months bank FDs is likely to be lower than money market fund returns.
- 18. What are variouslong-term financial options available for investment? Post Office Savings Public Provident Fund Company Fixed Deposits Bonds Mutual Funds
- 19. Objectives You will beable to explain Stock Exchange You will be able to identify National Stock Exchanges
- 20. What is astock exchange?
- 21. The Securities Contract(Regulation) Act, 1956 [SCRA] defines ‘Stock Exchange’ as any body of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities. Stock exchange could be a regional stock exchange whose area of operation/jurisdiction is specified at the time of its recognition or national exchanges, which are permitted to have nationwide trading since inception. NSE was incorporated as a National Stock Exchange.
- 22. What is an‘Equity’/Share? Total equity capital of a company is divided into equal units of small denominations, each called a share. For example, in a company the total equity capital of Rs 300,00,000 is divided into 20,00,000 units of Rs 10 each. Each such unit of Rs 10 is called a Share. Thus, the company then is said to have 20,00,000 equity shares of Rs 10 each. The holders of such shares are members of the company and have voting rights.
- 23. What is a‘Debt Instrument’? Debt instrument represents a contract whereby one party lends money to another on predetermined terms with regards to rate and periodicity of interest, repayment of principal amount by the borrower to the lender. ‘ In the Indian securities markets, the term bond’ is used for debt instruments issued by the Central and State governments and public sector organizations and the term debenture’ is used for instruments issued by private corporate sector.
- 24. What is aDerivative? Derivative is a product whose value is derived from the value of one or more basic variables, called underlying. The underlying asset can be equity, index, foreign exchange (forex), commodity or any other asset.
- 25. Derivative products initiallyemerged as hedging devices against fluctuations in commodity prices and commodity-linked derivatives remained the sole form of such products for almost three hundred years. The financial derivatives came into spotlight in post-1970 period due to growing instability in the financial markets. However, since their emergence, these products have become very popular and by 1990s, they accounted for about two-thirds of total transactions in derivative products.
- 26. What is MutualFund?
- 27. What is anIndex? An Index shows how a specified portfolio of share prices are moving in order to give an indication of market trends. It is a basket of securities and the average price movement of the basket of securities indicates the index movement, whether upwards or downwards. What is a Depository? A depository is like a bank wherein the deposits are securities (viz. shares, debentures, bonds, government securities, units etc.) in electronic form. What is Dematerialization? Dematerialization is the process by which physical certificates of an investor are converted to an equivalent number of securities in electronic form and credited to the investor’s account with his Depository Participant (DP).