Are you looking to invest in securities offering good potential returns with liquidity?
Capital market is that part of the financial market where buyers and sellers trade in financial securities, including stocks, bonds, warrants, etc. It is a market comprising both private as well as institutional investors, and helps to channelize funds from lenders to borrowers, who utilize the same by investing in their businesses.
The primary capital market deals with the issue of new of securities, and is normally tapped by relatively mature organizations which have established their basic product offering in the market. This enables them to charge a premium for their equity offering, and a rather lower rate of interest for debt. The capital raised is used to fund the expansion activities of the existing business. New issues can be made either in form of Initial Public Offerings, Follow on Public Offer or even Private Placements, and are generally facilitated by the process of underwriting.
Companies that wish to raise money from the capital market might need to meet certain requirements – such as 'going public', transparency, proper disclosure, etc. They must carefully decide which type of instruments they want to issue to raise money – it can vary from pure equity to pure debt to a hybrid of debt and equity. The advantage with capital markets, is that the reach is wider (more participants), and if the business proposition is a promising one, people will be willing to invest. From the investor's point of view, equity offers high potential returns, but without any guarantee. Bonds, on the other hand, are much safer as they offer fixed returns, and in case of liquidation, bond holders are paid before the shareholders. Thus, investors should also analyze their own needs carefully before investing in any security.
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