The call money market refers to the market for extremely short period loans; say one day to fourteen days. These loans are repayable on demand at the option of either the lender or the borrower. The money that is lent for one day in this market is known as “Call Money”, and if it exceeds one day (but less than 15 days) it is referred to as “Notice Money”. Term Money refers to Money lent for 15 days or more in the Inter Bank Market. These loans are given to brokers and dealers in stock exchange. Similarly, banks with ‘surplus’ lend to other banks with ‘deficit funds’ in the call money market. Thus, it provides an equilibrating mechanism for evening out short term surpluses and deficits. Moreover, commercial banks can quickly borrow from the call market to meet their statutory liquidity requirements. They can also maximize their profits easily by Continue reading
Investment Terms
Effective Communications in Investor Relations
Corporations worldwide work daily to increase the value of their stock for the investing public. In order to exploit this value, businesses must constantly make every effort to extensively communicate to their investors and potential investors. In view of this, investor relations are a vital part of business strategy, principally in the area of communication. Corporate departments involved with investor directions must make a necessary connection between efficient communication and company goals. Since communication is starting to play such an important role in investor relations, corporate communication programs are being created not only to participate in financial areas, but also to take part in media relations and other public communication. Ultimately, the best way for corporations to understand communications for investor relations is to look at an overview of the investor relations function, know how to organize investor relations, learn about investor relations programs and be informed on investor relations Continue reading
Basic Investment Objectives
Investing is a wide spread practice and many have made their fortunes in the process. The starting point in this process is to determine the characteristics of the various investments and then matching them with the individuals need and preferences. All personal investing is designed in order to achieve certain objectives. These objectives may be tangible such as buying a car, house etc. and intangible objectives such as social status, security etc. similarly; these objectives may be classified as financial or personal objectives. Financial objectives are safety, profitability, and liquidity. Personal or individual objectives may be related to personal characteristics of individuals such as family commitments, status, dependents, educational requirements, income, consumption and provision for retirement etc. The basic objectives of investment can be classified on the basis of the investors approach as follows: Short term high priority objectives: Investors have a high priority towards achieving certain objectives in a Continue reading
Difference Between Debentures and Bonds
DEBENTURES A debenture represents the smallest unit of public lending to a company. Like shares, they are represented in the form of a certificate. The common face value for a debenture in India is Rs.100, and they are always issued at par. Unlike an ordinary shareholder, a debenture holder assumes very little risk on his investment. Unlike the uncertain stream of dividends, which a shareholder receives, a debenture holder receives a fixed stream of interest. Payment of such interest is a legal obligation on the part of the company. Further, in general, a debenture is required to be secured against the assets of the company. Thus, a debenture is also a form of a secured loan. Secured debenture implies that should a company default in its obligations towards debenture holders in the repayment of their interest and principal, in law, the charged Continue reading
Confirmation Bias – Understanding Behavioral Biases in Finance
Confirmation bias is the inclination to seek or make sense of news or facts in a way that validates one’s preconceptions. So, during the decision making process for psychologist they will refer to information that supports their decision more favorably. They will rarely give the obvious negative much consideration and since our beliefs and postulations are definitely prejudiced so the tendency to give more attention and weight to data that support our beliefs than we do to contrary data will subtly but gradually have a harmful effect. An illustration of Confirmation Bias A very real manifestation of this tendency can be observed in the virtual world. For instance, investors are increasingly turning to message boards or virtual communities to search, clarify, and exchange information before making investment decisions. The volume of discussion on such portals is so intense that it has become possible to sense stock sentiments from here. These Continue reading
Impact of Interest Bearing Securities in Portfolio Management
Money market is a segment of the financial market where the securities are traded for shorter term and the risk associated with the money market is comparatively lower than the capital market. On the other hand, capital market is that section of the financial, market where the securities are traded for longer term and the risk is higher than the money market. The securities, which yield interest, are referred as the interest bearing securities. There are two types of interest bearing securities. One is fixed interest-bearing securities and the other is variable interest securities. The key interest rate in the capital market includes interest on public corporation bonds, government bonds, and rates on deposit of long-term debentures. The interest bearing securities in the money market include Treasury bill, commercial paper, certificate of deposits, money market bonds. The interest rate is the yield, which is paid to the owner of the Continue reading