Non-securities markets include mutual funds, Fixed Deposits, post office savings, and insurance. Stocks, bonds and debentures are not part of non-securities markets. These are more safe and secure. These markets do not involve much risk. Let’s know more about non-securities markets through this article.
Securities and non-securities markets
In the securities market, we have learned that securities that are either newly issued or already issued are bought and sold by owner and traders.
Primary Securities market is about to issue the fresh stock of shares directly from owner to general public. Whereas, secondary securities market are known to trade pre-owned shares of company between traders on stock markets.
But non-securities markets is different from securities market despite part of capital markets.
Non-securities markets are the form of investment without stocks, bonds, and derivatives. Such investment is made without stock exchanges. In the non-security market, mutual funds, FDs, post office savings, provident fund,and insurance are covered.
Understanding mutual funds
For everyone, mutual fund is well known financial term. Mutual fund is a fund made by number of small investors aiming to get better return.
Suppose, you don’t have the knowledge about any company to invest. You don’t have any expertise and skills. So, the investment is done by professional fund managers on the behalf of you by charging nominal charge collectively.
Simply put, mutual funds are collection of money from like minded investors or individuals who have no expertise to invest in company, and give right to fund managers to invest on the behalf of them.
Mutual funds are better means to mobilize surplus capital from general public and make available to corporations to fuel productive activities. It is highly essential to boost savings and increase capital formation.
Fixed deposits or FDs
Fixed deposit is a financial instrument offered by banks and non-banking financial institutions for fixed time. Investors receive fixed interest rates on theirs amount after maturity. It is non risky and offers higher interest rates than savings accounts.
Moreover, different financial institutions offer different interest rates. But, these interest rates are subject to change as per the monetary policy of central banks. FDs are different terms and amount has no limits. But, interest earned on FD could be taxable beyond certain limit.
Senior citizens even get more interest than general. FDs are also a better means to mobilize surplus capital as well as empower public to develop savings habits.
Post office savings
Post office account is well known in India, and it is like savings account. One person can only open one account and it is easily accessible given the net of post offices across the country.
Deposit in Post office account is risk free and receive d fixed interest. There are different schemes launched by central government to attract investors. Apart from these, insurance is also a non-securities market.
Investment in insurance
life insurance is a means to safeguard you and your family against any unfortunate events loss of life, property, or health. It is a type of service you buy by paying certain amount as premium.
On the other hand, there are various investment schemes and policies in the insurance sector to increase value of the original amount.
In case of investment in insurance, you pay certain amount of money at regular intervals for a given period of time and receive a lump sum in return at the fixed point of time in future. It is a constituent parts of non-securities markets
Provident fund
Provident fund is an investment fund. It is aimed to support the employee’s retirement. Certain amount of money from the salaries of employees are deducted at regular intervals to invest in such funds.
This is voluntarily formed. It is neither compulsory nor the only means to safeguard future of employees but a convenient means. After retirement, employees get benefits of long term investment income.
Last thought on non-securities markets,
In short, mutual funds, FDs, post office savings, insurance, provident fund are the instruments of non-securities market which are neither traded on stock exchanges nor transferred to others.
These are less liquid like securities market. But, such instruments offer risk free long term return. Those who have little knowledge or want to grow investment income in a risk free atmosphere, non-securities instruments are better. So, this is all about the non-security market.
Short summary of non-securities markets
Capital market has two components –securities markets and non-securities markets.
Primary Securities market and secondary securities market are the constituents of securities markets.
While non-securities markets instruments are neither traded on stock markets, nor they are transferred.
Mutual funds, post office savings, Fixed Deposits, insurance, provident fund are the instruments of non-securities markets.
Mutual fund is well known financial term. It is a fund made by number of small investors aiming to get better return but have little or no knowledge of investment.
Fixed deposit is more safe and secure form of investment means for fixed amount of return.
Insurance and Provident fund are other means of investment to grow your savings in long term.
Solved questions on non-securities markets
Take a look at the solved questions on this topic for better grasp of subject matter.
Q.1. What are the instruments of non-securities markets?
Ans: Mutual funds, post office savings, Fixed Deposits, insurance, provident fund are the instruments of non-securities markets. These instruments are neither traded on stock market nor transferred to others.
Q.2.What does mutual fund mean?
Ans: It is an fund of saving pooled by the small retailers with little or no knowledge of investment.
Suppose, you don’t have the knowledge about any company to invest. You don’t have any expertise and skills. So, the investment is done by professional fund managers on the behalf of you by charging nominal charge collectively.
This is all about the non-securities markets, its instruments of investment, return and difference with Securities markets.
Explaining Balance of payments
Primary and secondary securities