What Is Capital Market ?
Capital market is one of the key components of financial system where long-term securities such as equity and bonds are traded. Government and businesses raise funds by issuing variety of financial instruments such as derivatives, equity shares, bonds etc. It helps businesses in capital formation, business expansion and innovation. It provides opportunity for the investors to meet future financial goals.
Features Of Capital Market You Need To Know
The main characteristics or features of capital market can be described as follows:
1. Long Maturity Period
Capital market involves in the trading of financial instruments having long maturity period (generally more than one year).
2. Variety Of Credit Instruments
Shares, debentures, government securities etc. are the main credit instruments traded in the capital market. Therefore, it provides several investment options to the investors.
3. Purpose/Objective
Capital market helps to fulfill the long-term financial requirements of the firm such as fixed assets, machinery, equipment etc. It provides wealth creation opportunity to the investors.
4. Risk Involved
This market involves high level of risk while comparing to money market because of long maturity period.
5. Operating Institutions
Banks, stock exchange and investment companies operate capital market.
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6. Regulation
It is less regulated than money market.
7. Safety
It is less safe than money market because of long term maturity period, high level of risk and less regulations.
8. Economic Growth
Capital market helps companies to expand, creates job opportunity and promotes infrastructure development. So, it encourages economic growth in the country