A capital market is a market where both the capital market investment makes the investors to buy or sell securities in the capital markets. The stock market and bond market are types of capital markets where investors can trade in stocks and bonds. The investments in the capital market may be either in the bonds or stocks.
Investments in the stocks or bonds may be either investing in the new issues or in the existing securities. The primary capital market handles the trading and investments in the new issues while the secondary capital market takes care of the trading of existing securities.
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There are a number of financial regulators that monitor the capital market dealings in order to protect the investors from fraud. U.S. Securities and Exchange Commission is one such financial regulator that regulates the capital markets situated in their designated countries for the best interest of the investors.
The investment in stocks may in six different styles. Depending on the needs and reasons of the investors, the efficiency of the investment is estimated. There are some investors who depend on the advice of other people while purchasing or selling a particular stock.
There are technical investors who spend time in studying the stock patterns before trading any stock. The economist investors take their decision of stock trading depending on the economic forecasts. They are in the nature to take risks and get benefited in return following an efficient market hypotheses. There are some other types of investors who rely on the information given by the researchers, vendors and trade executives to make investment in the stocks. There are value investors who try to value the stock independently of its market price. Finally, there are conscious investors who depend on their own measurements and beliefs while making any stock investment.
Bond investment is different from that of stock investment. Bond investment is investing in the debt instrument that is 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.
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Last Updated on : 7th Nov 2016