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CLASSES OF INVESTORS

CLASSES OF INVESTORS

Investment

Investment may be defined as an activity that commits funds in any financial or physical form in the present with an expectation of receiving additional return in the future.

Features of Investment

1. Return: The primary objectives of investment is to derive a return in the form of dividend, interest or capital appreciation. The difference between selling price and purchase price is the capital appreciation.

2. Risk: The risk may relate to loss of capital, delay in repayment of capital ,non-payment of interest or variability in returns.

3. Safety of investment: The safety of an investment implies the certainty of return of capital without loss of money or time.

4. Liquidity: An investment is said to have liquidity if it is easily saleable or marketable without loss of money and without loss of time.

5. Legality: All investments should be approved by law.

SPECULATION

Speculation means buying or selling of securities with the expectation that price will increase or decrease in future .

Differences between investors and speculators

Investor Speculator

anticipation of regular income profit out of price changes in the

market.

performance of the company in market performance of securities.

making profit.

buys and sells securities occasionally. buys and sells securities on

continuous basis

prepared to bear low risk undertaking high risk.

takes physical delivery of security does not physically deliver securities

GAMBLING

Gambling is unplanned, non scientific and without the knowledge of the exact nature of risk. Typical examples are horse riding , game of cards, lottery etc.

INVESTORS IN THE CAPITAL MARKET

The various investors of corporate securities (Financial investors) include individuals, speculators, joint stock companies, Life insurance companies, commercial banks, public provident funds, Underwriters, trustees, investment bank, IDBI, ICICI, IFCI, SFCs, SIDCs etc. Primarily the savings and surplus of individuals, joint stock companies and public and private institutions are invested in the corporate securities.

1. Individual Investors

Real investors

Speculative Investors

Individuals affiliated with issuing company (customer, employees, existing

shareholders, creditors )

2. Joint Stock Companies

3. Institutional Investors

Private institutional investors

Public financial institutions : IDBI, ICICI, IFCI, SIDC, SIIC

Foreign Institutional Investors : A FII means an institution established or incorporated outside India that proposes to make investments in India, in securities

INVESTORS IN THE CAPITAL MARKET

1) Retail investors : Retail individual investors means an investor who applies or bids for securities of or for a value not more than Rs.1,00,000.

2) High networth investors : Any bid made in excess of Rs.1,00,000 will be considered

3) Qualified Institution Buyers (QIBs): These are those institutional investors who are generally perceived to possess expertise and the financial muscle to evaluate and invest in the capital markets

4) Public financial institutions

5) Scheduled Commercial Banks

6) Mutual funds

7) Foreign Institutional Investors registered with SEBI

8) Venture capital funds registered with SEBI

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