Financial Instruments

-Charu Chauhan
 What is Investment?
Investment refers to the allocation of money, time, or resources with the
expectation of generating a future return or benefit.

Capital Allocation

Risk and Return

Time Horizon

Diversification
Investment includes:
Investment Vehicles

Financial Goals

Monitoring and Evaluation

Risk Tolerance
 What is Equity Investment?
Equity investment, often referred to as stock or equity ownership, involves
buying and owning a share or ownership interest in a company.

Types of equity Investments

Bonds Stocks

Indice
ETFs
s
 What is stocks?
Stocks, also known as shares or equities, represent ownership in a
corporation or company. When you buy stocks, you become a shareholder
in that company.

Ownership Stake

Dividends

Capital Gains

Key points about equity Voting Rights

investments
Risks

Long-Term Growth

Types of Equity

Stock Exchanges
 What is Stock Market Indices
Stock indices, often referred to as stock market indices or equity indices, are
numerical representations of the performance of a specific group of stocks or the
overall stock market.
What is exchange traded funds (ETFs)
Exchange-Traded Funds (ETFs) are investment funds that are traded on stock
exchanges, much like individual stocks.
ETFs can be defined as a set of securities that trade similarly to stocks on an
exchange. And its stock prices fluctuate all day as they are bought and sold.

Characteristics and features of

ETFs:

Diversification Liquidity Transparency Low Expense

Ratios

Intraday Pricing Tax Efficiency Dividends and

Interest
 How to buy and
sell in stock
market?
Open a Brokerage Research and Select Place an Order
Account Stocks (Sale/Buy)
 Derivatives
Derivatives are financial instruments whose value is derived from an underlying
asset or a group of assets. Derivatives are used for various purposes, including risk
management, speculation, and investment.

Futures

Common Types
Forward Options
of Derivatives

Swaps
 Futures contracts are standardized agreements to buy
Futures Contracts or sell an underlying asset at a specified price on a
future date.

Options provide the holder with the right, but not the obligation, to
buy (call option) or sell (put option) an underlying asset at a Options
predetermined price (strike price) on or before a specified expiration
date.

Swaps are agreements between two parties to exchange a series of

Swaps cash flows over a set period. Swaps are often used to manage interest
rate risk, exchange rate risk, and other financial risks.

Similar to futures contracts, forward contracts are private

agreements between two parties to buy or sell an underlying Forward Contracts
asset at a future date.
 Commodities Derivatives
Financial instruments that allows investors to profit from investments in
commodities (Agriculture products, Metals etc.) without owing them.

Types of Commodity Derivatives

Forwards Future Option

Swaps
Contracts Contracts Contracts

Commodity Derivatives Exchanges in India

Multi Commodity National Commodity &

Exchange Derivative Exchange
 Currency Derivatives
Exchange Traded Contracts whose value is based on the underlying asset, which is
a currency.
These contracts allow investors to buy or sell specific unit of a fixed currency at a
predetermined date and rate.
These are actively traded on stock exchanges and are commonly used by importers
to hedge against domestic currency fluctuations.

USD-INR

EUR-INR

JPY-INR

GBP-INR
Advantage of Trading in Derivatives:

Leverage

Volatility Risk
Opportunities Management

Liquidity Flexibility
 Mutual Funds:
A mutual fund is a type of investment vehicle where funds from multiple investors
are pooled together to invest in a diversified portfolio of stocks, bonds, or other
securities. These funds are managed by professional fund managers or investment
companies.

Investors

Fund
Mutual fund Returns
Managers
procedure
Securities
 Mutual Fund Categories:

Money Market Tax-Saving

Equity Funds Debt Funds
Funds Funds

Balanced Funds Sector Funds Index Funds

 Multi Cap
Funds

Large Cap
Small Cap
Funds
Funds

Equity Mutual Funds

Categories

Large & Mid

Mid Cap Funds
Cap Funds
Process of Investing in Mutual Funds:
Set
Monitor &
Financial
Review
Goals

Make the Open an

Investment account

Research
Submit
& Select
Application
Funds

Determine
Select the
Investment
right funds
Amount
 Systematic Investment Plan:
A Systematic Investment Plan (SIP) is a disciplined and gradual approach to
investing in mutual funds. It allows investors to contribute a fixed amount of
money at regular intervals (usually monthly) into a selected mutual fund.

Disciplined Investing

Advantages Affordability

Of
Professional Fund Management
Investments
In Risk Diversification
SIP
Reinvesting
 Bonds
Bonds are debt securities that represent a form of borrowing by an issuer.
When an entity, such as a government or a corporation, needs to raise capital, it may
issue bonds as a way to borrow money from investors. In essence, investors who buy
bonds are lending money to the issuer in exchange for periodic interest payments and
the return of the principal amount at the bond's maturity.

Government
Bonds
Types of Bonds
Corporate Bonds
 Corporate FDs:
Corporate Fixed Deposits (FDs) are investment options offered by non-banking
companies to raise capital. Similar to bank FDs, these deposits have fixed tenures
and offer interest rates, often higher than those of banks.

Higher
Interest Corporate FDs offers higher interest rate compared to banks.
Rate

Diversification Corporate FDs provide an opportunity for investors to diversify their

fixed-income portfolio beyond traditional bank deposits.

Fixed Tenure Like bank FDs, corporate FDs come with a fixed tenure and provide
& Return predictable returns.

Corporate FDs are assigned credit ratings by rating agencies. Higher-rated

Credit Ratings FDs are considered to have lower default risk.
Thank You!