Investment in the present scenario

Investment means employing saving in securities to generate future income in a safe way. It is very broader in scope and coverage. Investment can be either a real investment or a financial investment. Investment in tangible assets like land, building and machinery is a real investment. Investment in financial assets like common stock, preferred stock, treasury bills and bond is financial investment.

Investment in different from speculation based on time-horizon and risk-return characteristics of investment. Securities are financial assets that from the part of an investor's wealth. Numbers of investment alternatives are available to investors in the financial market. Broadly these alternatives may be classified as financial assets alternatives and real assets alternatives. Common stock, preferred stock, bond, convertibles, warrants, options, rights, futures etc are some financial alternatives. Given the various investment alternatives every investor has a target to increase gain from investment in securities depending on investor's perception and choice of the particular securities. These securities are traded in security market. Securities markets are mechanisms for challenging savings from savers to the ultimate investors who invest in real assets. The security markets are classified in two categories;

I. Money Market and capital market

In money market all financial assets with a term to maturity of one year or less than one year are traded. Such as Treasury bills are issued and traded in money market. The main function of money market is to provide short term loans to the business, loans to the government and loans to households. The government and business organizations requiring short term funds sell securities and investors who have surplus money buy securities in this market.

II. Primary market and secondary market

The security market consists of primary and secondary market. When firms need capital they may sell new securities. These new securities are sold in primary market. Investment bankers help market these new issues of stocks, bonds or other securities to the public. The issue of securities in the primary market leads to direct transfer of money from the savers to the issuer of the securities. Thus the primary market helps transfer the funds from savers to investors to make the capital available for new investments in building, equipment, stock of necessary goods.