1. Finance & Economics Club
IIT Guwahati
Basics of Finance
Sasank Gurajapu
B.Tech 4th Year
EEE
9492238298

2. What’s Finance & Economics ?

3. What’s Finance & Economics ?

4. What’s Finance & Economics ?

5. What’s Finance & Economics ?

6. What’s Finance ?
Finance is a term describing the study and
system of money, investments, and other
financial instruments.

7. Wait! Then what’s Economics ?
Economics is a social science concerned with the
production, distribution and consumption of goods and
services.

8. Got the difference ?

10. Finance
Let’s get knowing more about Finance

11. What’s Finance ?
Finance can also be defined as the
science of money management.
Finance is a term describing the study and system of
money, investments, and other financial instruments.

12. Questions to be answered ?
Who ?
Who is gonna invest ?
Who is going to manage ?
What ?
In what are we investing?
What are the possibilities ?
How ?
How does it all work ?
How do we decide ?

13. Who ?
● Governments
Public Finance is the branch which deals in this. Taxes, Debt, Revenue distribution come under it
● Companies
Corporate Finance deals in accounting, company structure to maximise value
Investment Bankers, Private Equity, Risk managers are behind most of these actions
● Personal Finance
Managing “your” money is the part of personal finance.
Personal Finance involves taking decisions about your wealth such as which mutual funds to invest in,
how to diversify your wealth, SIPs etc

14. What ?
● Stocks
Popular one! Stock stock (also known as "shares" and "equity) is a type of security that signifies
ownership in a corporation and represents a claim on part of the corporation's assets and earnings.
● Bonds
A bond is a fixed income investment in which an investor loans money to an entity (typically corporate or
governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate
● Options
Options are a financial derivative sold by an option writer to an option buyer. The contract offers the
buyer the right, but not the obligation, to buy (call option) or sell (put option) the underlying asset at an
agreed-upon price during a certain period of time or on a specific date.

15. What ?
● Futures
Futures are financial contracts obligating the buyer to purchase an asset or the seller to sell an asset, such
as a physical commodity or a financial instrument, at a predetermined future date and price
● Derivatives
A derivative is a financial security with a value that is reliant upon or derived from an underlying asset or
group of assets. The derivative itself is a contract between two or more parties based upon the asset or
assets
● Mutual Fund
A mutual fund is an investment vehicle made up of a pool of money collected from many investors for the
purpose of investing in securities such as stocks, bonds, money market instruments and other assets.
● Insurance
Insurance is a means of protection from financial loss. It is a form of risk management.

16. How ?
● Companies issue stocks, bonds, options etc to raise money. This process is executed by
investment banks.
One can buy these “Securities” from Stock Exchange, with help from brokers.
● Governments issue bonds to raise money for their activities.
This are used by general public as low risk investment.
● Crude Oil, Currencies, Gold & Precious metals are the usual commodities which can be traded in
respective exchanges

17. But why and how should i benefit?
Trading
Trading is an active style of participating in the financial markets that seeks to outperform traditional
buy-and-hold investing. Rather than trying to profit from long-term uptrends in the markets, traders look
for short-term price moves to profit in both rising and falling markets.
Investing
The goal of investing is to gradually build wealth over an extended period of time through the buying and
holding of a portfolio of stocks, baskets of stocks, mutual funds, bonds and other investment instruments.

18. Let’s do this! :D
Wait!
What all should I know ?

19. Initial terms
Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash
equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds.
Return
Return is a profit on an investment. It comprises any change in value of the investment which the investor
receives from the investment, such as interest payments or dividends.
Risk
Risk includes the possibility of losing some or all of the original investment.

20. Types of Risk
Unsystematic Risk
It is the type of uncertainty that comes with the company or industry you invest in. How unforeseen
circumstance affects a given industry or company.
Systematic Risk
It is the uncertainty inherent to the entire market or entire market segment. Also referred to as
volatility, systematic risk consists of the day-to-day fluctuations in a stock's price.
Diversification is crucial to negating risk. Hence Portfolio becomes crucial

21. That’s all good!
Now how do we select our investments ?
And decide how the portfolio is made ?

22. References & Readings
● Investopedia.com - One-stop solution
● A random walk down Wall Street - Burton G Malkiel - Good book to begin studying
● Mathematics for Finance - Marek Capinski - Get knowing the mathematical concepts behind the
formulas and working of financial instruments. Not compulsory, but it’s good to know.
● https://www.investopedia.com/ask/answers/12/difference-investing-trading.asp
● https://www.investopedia.com/walkthrough/corporate-finance/4/return-risk/systematic-risk.aspx
● https://www.investopedia.com/video/play/difference-between-finance-and-economics/
● https://www.investopedia.com/terms/f/financialinstrument.asp

23. Sasank Gurajapu 9492238298
Welcome to world of Finance!
Never Stop Exploring