Capital Market What is it?
speaking of capital market, reference is made to financial assets that are made up of buying and selling debts. These can occur in different ways: long, medium and short term. Backed by shares.
Capital markets channel the fortunes of savers. And they allow those who are able to use it to make long-term investments. As is the case of companies or governments.
The entities that are in charge of regulating this type of transactions, verify the movement of the capital markets. In this way they manage to protect investors against fraud. Next you will knowWhat is the capital market?
- The capital market: Its special features
- Capital market and its types
- Who participates in the capital market?
- The capital market and its importance in society
- Agents in the economy and the capital market
- The capital market and its activities
- The investment and its success
- The importance of being well informed to make an investment
- Before an investment, what should be taken into account?
The capital market: Its special features
The capital market has some peculiarities that make it special, among which are:
- When buying the securities or shares, the investor becomes a partner of the company in proportion to the amount invested.
- Investing increases risk. Since it is a market of high and variable yields. Because of price volatility.
- Benefit guarantees are void.
- There are no defined deadlines. Everyone decides when to buy and when to put the titles up for sale.
- It is comparatively very simple. It works very well for buying and selling titles. Therefore, they generate a lot of liquidity.
Capital market and its types
They find each other various types. These have differences that can be perceived through their function and the business that is carried out:
These are made up of fixed income instruments (obligations and bonds). In addition, shares or variable income.
Bank loan and credit markets
According to the function in which they are structured, they can be of two types: Organized and unorganized.
Based on the assets, the markets are divided into primary and secondary:
Primary. This type is characterized by being expressed for the first time. can change hands between the buyer and the issuer. Such is the case of the public offer, when the issue of bonds (fixed income) or in the case of variable income is presented.
Secondary: It is effective to give liquidity to the titlessy to be able to set the price rate. These assets are exchanged between the different buyers.
Who participates in the capital market?
Within this market, many entities related to the financial sector. Their participation manages to regulate and perfect the different procedures that are carried out in the market. The most important entities are the following:
Its essential function is to provide an operational organization for financial procedures. To do this, it takes care of carrying registration and monitoring of those movements that are made by plaintiffs of resources and donors.
It also attests to quotes and provides information to the investor. Regarding the situation presented by the company, financial and economic. And in addition, it deals with the behavior of financial instruments.
They are the entities that place actionsis an aliquot part of the capital stock. This is done in order to obtain benefits from investors.
These issuers can be corporations such as: the federal government, decentralized public entities or credit institutions.
Intermediaries and Brokerage House
Among the functions of the different intermediaries are the following:
- Various operations regarding the purchase and sale of shares.
- Portfolio management
- Investment portfolio of intermediaries.
investor or capitalist
Investors can be within the category of individuals, legal entities, foreign, institutional or qualified investors.
In this range are institutions or people who have high economic resources. And in addition, they have the availability to invest this capital in securities.
The capital market and its importance in society
What helps capital markets exist, is the contribution that this system provides. It is achieved through the process of saving or investment, in each country. On the other hand, it has the peculiarity of generating employment and economic stability for the benefit of society.
Agents in the economy and the capital market
Two types of units are known in the capital market:
Surplus units are existing agents in economies. Their essential function is to defer the consumption of capital today, thinking about the consumption to be done. To obtain rewards and benefits later.
Similarly, there are units that need funds to carry out projects. And that they are willing to pay for obtaining these. What is called deficit units. Among which are: Limited Companies, Investment Fund, etc.
The capital market and its activities
The one who disburses his money must receive a remuneration for this activity. And whoever needs to use those resources today is obliged to pay a cost for using those funds. Either in interest or with some kind of benefit.
Although it seems complicated and difficult, you have to get a counterpart. Thus, there is no meeting point. Hence the need for a market with organization that contributes effectively to the transfer of resources.
The investment and its success
It is known that a good investment can bring well-being and success. Since it manages to satisfy the objectives, needs and plans of the person who performs it. For this reason, the client must know how to choose very well and with caution, where he is going to make his investment.
On the other hand, knowing the risks that must be assumed and everything that has to do with the profitability that is going to be obtained. Being attentive to the movement of the market and investments is very important to conduct business properly. Therefore, you must be vigilant to take advantage of opportunities.
There are periods where the market offers financial attractions for investments. This allows for more stable returns, which favor future income.
This type of transaction offers benefits, a long-term savings policy. And you don't like to take risks, regular savings and constant investment is recommended.
The importance of being well informed to make an investment
If a person needs to invest, he must keep in mind all the information about his possibilities to invest. With it, you can know the risk to invest, the facilities to saveadministration costs and what transactions are involved in the transactions.
To request this information, it can be received from financial institutions:, which manage funds in general.
- Stock brokers or brokers.
- Administrators that deal with funds in general.
- Securities and their agents.
- Companies or insurance companies.
- Bank entities
These are some institutions, which from investment portfolios. They offer different tools to invest.
Before an investment, what should be taken into account?
Before the investment should be clear. As to, What are the objectives and what do you want to achieve? with this savings.
For example, if you want to save for the next vacation or to buy a car. Short-term goals are being considered.
Otherwise, if your goals have to do with buying a house or apartment or your children's college education. We are talking about a medium or long-term goal.
You may be interested in reading What is a market niche?