03 August 2010
what is the difference between share & a security?i mean what exactly security is??is it different from bonds,mutual funds,debenture,shares..or what?
03 August 2010
The definition of 'Securities' as per the Securities Contracts Regulation Act (SCRA), 1956, includes instruments such as shares, bonds, scrips, stocks or other marketable securities of similar nature in or of any incorporate company or body corporate, government securities, derivatives of securities, units of collective investment scheme, interest and rights in securities, security receipt or any other instruments so declared by the Central Government.
Shares: When companies look for money for their business, they can get it in two ways - either they borrow from a bank and pay interest ("debt") or they ask people like you and me to invest and give us shares ("equity"). Shareholders are the owner of the company. By issuing shares company will get capital from share holders. Shares are two types:-
03 August 2010
Mutual funds: When a lot of shares are available on stock exchanges, you and me don't know which companies to invest in. But let us say a guy named Sandip Subherwal knows, and keeps track of the market daily. So we give him our money and he buys and sells stocks for us. This is a mutual fund - it's our money (mutual), and Sandip is a Fund Manager. There is a structure to this in India, so a fund manager is part of an "asset management company (AMC)". To protect Sandip from running away with our money, SEBI has some rules in place, and there are "trustees" for every fund. With this structure the AMC issues "units" to us for the money we have invested, and tells us how much our units are worth daily (NAV). We can then choose to exit by selling our units back to the AMC ("redemption").