Stock Market lec 2

8/8/2019 Stock Market lec 2

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Investment


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` A sacrifice ofcurrentmoney orotherresourcesfor

future benefits.

` Theapplication ofmoneyforearningmoremoney.


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` Time Horizon

` Risk disposition

` Returnexpectations` Basisfordecisions

` Leverage


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` Rate ofReturn

` Risk

` Safety OfPrincipal

` Marketability` Tax Shelter

` Hedge AgainstInflation

` Convenience

` safety


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` Time Horizon

Plansforalongertime

horizon.Itsholding

period may befrom one

yearto fewyears.

` Risk Disposition

Assumesmoderaterisk.

` Return Expectations

Likesto havemoderaterate ofreturnassociated

withlimited risk.

` Time Horizon

Plansforashorter

period. Holdingperiod

variesfromfew daysto

months` Risk Disposition

Willingto undertakehigh

risk.

` Return Expectations

Likesto havereturnsfor

assuminghighrisk.


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` Basisfordecision

Considersfundamental

factorsand evaluatethe

performance ofthe

companyregularly.

` Leverage

Investorsusestheirown

fundsand avoids

borrowed funds

` Basisfordecision

considersinside

informationtechnical

chartsand hearsays.

` Leverage

Investorsuse borrowed

fundsto supplementtheir

personalresources


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` Meaning ofGamble

Itisaperform ofanactinvolvinganelement of

risk.

Gamblingrefersto takingriskwithout demanding

compensationintheform ofincreased expected

return.


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` Itisarepetitiveactivity.

` Gamblerplayswithpersistent , optimismand

attitude ofwinning.

` Gamblerneverstopswhileheiswinning.` Gamblertakesmoreriskthanhecanafford.

` Gamblerenjoysgreatthrillfromgambling.


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` Risk Disposition

Investoralways

takelowrisk bykeep

diversifyinghisportfolio.

` Timehorizon

Investorkeepstheportfolio

forlongerperiod.

` Riskreturntrade off

Negative outcomeare

expected

` Risk Disposition

Gambleralwaysreadyto

takehigherrisk.

` TimehorizonGamblermakesthe

positioninsocks For

normallyintraday

purpose.

` Riskreturntrade off

Highestlevel ofreturnata

givenlevel ofrisk


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` Chance Factor

Investormakescareful

analyses ofdifferent

investment opportunities

studiesriskand returninvolved and accordingly

decidesportfolio

` Type ofriskinvolved

Commercialrisk

` Chance Factor

It depends onchance.

Theresultsare

determined byroll ofdice

ortheturn ofcard.

` Type ofriskinvolved

Artificialrisk


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` Theyarelargeinnumbers.

` Investableresourcesare

comparativelysmaller.

` Theygenerallylacktheskill

to carry outextensive

evaluationand analysis

beforeinvesting.

` Fewerinnumbers.

` Theseare organizationswithsurplusfundswho

engageininvestmentactivities.

` Theyengageprofessionalfund managersto carry outextensiveanalysisandevaluation ofdifferentinvestment.


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INVESMENT AVENUES

NON

MARKETABLE

FIN ASSETS

BONDS

MUTUAL FUNDSCHEMES

REAL ASSETS

EQUITY SHARES

MONEYMARKET

INSTRUMENTS

LIFE INSURANCEPOLICIES

PRECIOUS

OBJECTS

FIN

DERIVAT

IVES


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` NonMarketable Financial Assets

Bank deposits

Post office deposits

Company deposits

Providentfund deposits


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Bank Deposits

` Saving deposits

` Fixed deposits

Post office deposit

` Post officesavingaccount

` Post officetime deposits

`

Monthlyincomescheme ofthepost office` Kisan vikas patra

` Nationalsavingcertificates


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` Itssimilarto asavingsaccount ofa bank.

` Theinterestrateis 3.5%pm

` MinimumRs 20 forordinaryaccountand Rs. 250 fora

cheque bookfacilityalongwith.

` MaximumRs.50,000 forasingleaccountanrs.1,00,000

forajointaccount.

` Interestrateistaxexempt.


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` Itssimilarto fixed deposits ofbanks.

` Depositscan bemadeinmultiples ofrs.50 withoutany

limit.

` Theinterestrateisslightlyhigherthanthose ofbank

deposits.

` Theinterestiscalculated halfyearlyand paid annually.

` No withdrawalispermitted upto sixmonths.

` Itcan bepleged.


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` Theterm oftheschemeis 6 years.

` Theminimumamount ofinvestmentisrs.1000.the

maximuminvestmentcan bers. 300000 inasingle

accountand 6 lacs inajointaccount.

` Theinterestrateis 8%paid onmonthlyand a bonus of

10%ispayable onmaturity.

` Thereisno tax deductionatsource.


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` Theminimumamount ofinvestmentisrs.1000.

` Thereisno maximumlimit.

` Theinvestment doublesin 8 yearsand 7 months.

`

Thereisno tax deductionatsource.` Itcan bepledged

` Thereiswithdrawalfacilityafter2yearsand 6 months.


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` Itcomesin denominations ofrs.100,rs.500,rs1000.rs

5000 and rs.10000.

` Ithasaterm of6 years. overthisperiod rs.100

becomesrs160

` TheinvestmentinNSCcan be deducted before

computingthetaxableincomeundersection 80c.

` Thereisno tax deductionatsource.

` Itcan bepledged.


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` Fixed depositsmobilized frommanufacturingcompaniesareregulated bycompanylaw board.

` Fixed depositsmobilized byfinancecompaniesareregulated bythereserve bank ofIndia

` Foramanufacturingcompaniestheterm ofdepositscanbe oneto threeyears.

` Forfinancecompaniesitcanvary between 25monthstofiveyears.

` Theinterestratesarehigherthanthose on bankfixed

deposits.` No incometaxis deducted atsourceiftheinterest

incomeisupto rs.5000 inafinancialyear.


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` Employeeprovidentfund scheme

` Publicprovidentfund scheme


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Bluechipshares

Growthshares

Incomeshares

Cyclicalshares Speculativeshares


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` Bonds

Deep discount bond.

Education benefit bond. Index bond.

Retirement benefits bond.

`

MoneyMarketInstruments Treasury bills

Commercialpapers

Certificate ofdeposits


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` Lifeinsurance

Lifeinsuranceisacontractforpayment ofasum of

moneyto apersonassured(orto thepersonentitled to receivethesame) onthehappening ofeventinsured.

Protectionagainstrisk ofdeath

Easypayments

Liquidity Taxrelief

Real Estate

Residentialproperty

Agriculturalland

Commercialproperty

Resort

Second house


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` Precious objects

Gold and silver

Preciousstones Art objects

` Financial Derivatives

Options Futures

Swap

forwards


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Financial

Markets


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Financialmarketscan bereferred to asthosecentersand

arrangementswhichfacilitate buyingand selling of

financialassets, claimsand servicesetc.

Examples,

Issue ofequityshares.

Granting ofloan bytermlendinginstitutions.

Deposit ofmoneyinto the bank.

Purchase ofdebentures.

Sale ofsharesetc.


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Financialassetsare onewhichisused for

production orconsumption orforfurther creation of

assets.

Eg, Abhi buysequitysharesand thesesharesarefinancialassetssincetheyearnincomeinfuture.


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Segments ofFinancialMarkets

MoneyMarketCapitalMarket


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Capitalmarketisthat

segment

ofthemarketwheresecurities

withmaturities of

morethanoneyearare bought

and sold


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MoneyMarketisthemarket

forshortterm

financialassetswithmaturities ofone

yearorless.


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Types OfFinancialMarkets

PrimaryMarket SecondaryMarket


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Primarymarket

primaryMarket dealswiththosesecuritieswhich

areissued to thepublicforthefirsttime.ItisalsoknownasNewIssueMarket.

SecondaryMarket

SecondaryMarket dealswithsecuritieswhicharealready beenissued and aretraded instock

exchanges.


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INVESTORS

ISSUERS

FINANCIALINTERMEDIARIES

BANKS NBFCS

BROKERS

Documents

Stock Market lec 2