Types of Investments

Types of Investments

In this section, we shall be looking at money and capital market instruments. I shall make this less technical for your understanding

1. Money Market Instruments

The money market deals with financial instruments that are traded or transacted in the short term. The money market covers banks, finance houses, discount houses and all other forms of organizations dealing in financial instruments not in the capital market. Some Money Market Instruments Are:

a) Savings Account

Most of you will have a savings account. This is an account where you make periodic savings. It attracts some interest. This is good and can be a well-deserved starting point for anyone. You’ve got to have an account.

b) Current Account

This is for those who use cheque books. Cheques can be paid into this kind of account, while the account holder can also issue out cheques to their creditors and such amounts will be drawn from their accounts and paid to them.

Current accounts are mostly used by business people. I’ll advise that if you want to start investing in stocks, it is good you also open a current account to have your dividend payouts paid into it.

c) Fixed Deposit

Your money in a This is a tenored account where you fix deposit account for 30, 60, 90, 180 days etc. After the end of the tenor, you earn a percentage of interest which would have been determined from the beginning of the investment. This investment pays better than a savings or current account.

d) Call Deposit

clients whereby their customers can deposit idle funds This is a fantastic service provided by banks to their that may soon be needed to meet certain transactions. Call deposits are a bit different from fixed deposits because call deposits are shorter, you could deposit your money in there for few days 10, 15 days etc.

e) Treasury Bills

Treasury Bills, these are certificates that the Central Bank of a country makes available on behalf of government to raise money from the public for theĀ  government. The government pays a certain amount as fixed interest to those who buy and hold these certificates for a period.

2. Capital Market Instruments

These are long-term investments to raise capital for companies/organisations or that investors use in growing their idle funds. Put differently, while money market instruments are short-term in nature, capital market instruments are long-term in nature. By long- term, I mean one year and above.

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