Insight Into Capital Market Investment

The capital market investment offers the investors a chance to buy or sell securities in the capital markets. The two types of capital markets are the stock market and bond market where investors can trade in stocks and bonds. Investors may be investing in the new issues or in the already existing securities. Investments in the new issues is handled by the primary capital market while the secondary capital market takes care of the trading of existing securities

Hence, the capital market is basically the financial pool to raise long term funds by different companies as well as the government.

Stock Investment

Depending on the needs and reasons of the investors, the efficiency of the investment in capital market is estimated. One comes across various natures of investors. The technical investors spend time in studying the stock patterns before trading any stock whereas the economist investors take their decision of stock trading depending on the economic forecasts. These investors take risks and get benefited in return following an efficient market.

Some investors seek the advice of other people while purchasing or selling a particular stock. Then there are value investors who try to value the stock independently of its market price. The conscious capital market investors are those who depend on their own measurements and beliefs while making any stock investment.

The stock investment is basically the trading in the company stocks, derivatives and other securities.

Investing in the capital market helps the big companies to raise their long term capital. Basically the stock exchanges function as the central place for such liquid transactions. The derivative instruments like the stock options and the stock futures have their value determined by the price of the underlying asset.

Bond Investment

Bond investment is very different from that of stock investment. In this capital market investment, the participants buy and sell debt securities. Investing in the debt instrument issued by a company or government, the bond investor is actually lending money to the company while in return is promised to be paid the full principal amount plus a fixed periodic payout.

The yield on the bond is calculated by putting together the final principal and total payouts received. The yield is the effective interest rate for the tenure of the bond. The capital market investment in the bond market is done by institutional investors, governments, traders andindividuals. Another way of investing directly in the bond issue is the Exchange-traded-funds.