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 is gonna invest ?
Who is going to manage ?
In what are we investing?
What are the possibilities ?
How does it all work ?
How do we decide ?
13. Who ?
Public Finance is the branch which deals in this. Taxes, Debt, Revenue distribution come under it
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 ?
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.
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 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 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
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
● 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 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
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
17. But why and how should i benefit?
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.
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.
19. Initial terms
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 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 includes the possibility of losing some or all of the original investment.
20. Types of 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.
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
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.