Capital Market Investment

By: EconomyWatch   Date: 23 November 2010

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Capital market investment takes place through the bond market and the stock market . The capital marke t is basically the financial pool in which different companies as well as the government can raise long term funds.

Capital market investment that takes place through the bond and the stock market may be elucidated in the following heads.

Capital market investments in the stock market

The stock market is basically the trading ground capital market investment in the following:

  • company stocks
  • derivatives
  • other securities

The capital market investments in the stock market take place by

  • small individual stock investors
  • large hedge fund traders.

The capital market investments can occur either in

  • The physical market by a method known as the open outcry. The New York Stock Exchange is a physical market or
  • Trading can also occur in the virtual exchange where trading is done in the computer network. NASDAQ is a virtual exchange.

Investments in the stock market helps the large companies to raise their long term capital . The investors in the stock market have the liberty to buy or sell the stock that they are holding at their own discretion unlike the case of government securities , bonds or real estate . The stock exchanges basically function as the clearing house for such liquid transactions. The capital market investments in the stock market are also done through the derivative instruments like the stock options and the stock futures. The derivatives are the financial instruments whose value is determined by the price of the underlying asset.

Capital Market Investments in the Bond Market

The bond market is a financial market where the participants buy and sell debt securities . The bond market is also differently known as the debt, credit or fixed income market. There are different types of bond markets based on the different types of bonds that are traded. They are :

  • corporate
  • government and agency >
  • municipal
  • bonds backed by mortgages , assets
  • Collateralized Debt Obligation .

The bonds , except for the corporate bonds do not have formal exchanges but are traded over-the- counter . Individual investors are attracted to the bond market and make investments through the bond funds, closed-end-funds or the unit investment trusts . The net inflows of total bond funds increased by 97% in 2006 than that in 2005. Another way of investing directly in the bond issue is the Exchange-traded-funds .

The capital market investment in the bond market is done by

  • institutional investors
  • governments, traders and
  • individuals.

For more details on the capital market investment the relevant websites that can be viewed are stockhifi.com, sharesdaily.in, capitalmarket.com, capital-invest.com etc.

Capital Market Investment


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