Vidhu Khatri Sorav Sharma Manali Mathur Atul Kesharwani Rahul Sanvariya

FINANCIAL INSTRUMENTS
A financial instrument is a trade-able asset of any kind; either cash, evidence of an ownership interest in an entity, or a contractual right to receive or deliver cash or another financial instrument. According to IAS 32 and 39, it is defined as "any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity".

Some common financial instruments include cheques, which transfer money from the payer, the writer of the check, to the payee, the receiver of the check.

Stocks are issued by companies to raise money from investors. The investors pay for the stock, thereby giving money to the company, in exchange for an ownership interest in the company. Bonds are financial instruments that allow investors to lend money to the bond issuer for a stipulated amount of interest over a specified

Financial instruments can also be used by traders to either speculate about future prices, index levels, or interest rates, or some other financial measure, or to hedge financial risk. The 2 parties to these kinds of instruments are speculators and hedgers.
Speculators attempt to predict future prices or some other financial measure, then buying or selling the financial instruments that would yield a profit if their view of the future should be correct. Hedgers attempt to mitigate financial risk by buying or selling the financial instruments whose value would vary inversely with the hedged risk.

Types of Investment Instruments

Investment Instruments are available investment options which any investor, big or small, may use to store money as a safe deposit in an interest-paying account. Investors may also channel their money into other financial assets with the hope of making extra money from such assets. There are basic investment instruments, and others that are more complex. These include savings accounts, certificates of deposit, stock investments, mutual funds, hedge funds and many others.

Equities
Equities are a type of security that represents the ownership in a company. Equities are traded (bought and sold) in stock markets. Alternatively, they can be purchased via the Initial Public Offering (IPO) route, i.e. directly from the company. Investing in equities is a good long-term investment option as the returns on equities over a long time horizon are generally higher than most other investment avenues. However, along with the possibility of greater returns comes greater risk.

Bonds Bonds are fixed income instruments which are issued for the purpose of raising capital. Both private entities, such as companies, financial institutions, and the central or state government and other government institutions use this instrument as a means of garnering funds. Bonds issued by the Government carry the lowest level of risk but could deliver fair returns.

Deposits

Investing in bank or post-office deposits is a very common way of securing surplus funds. These instruments are at the low end of the risk-return spectrum.

Cash equivalents These are relatively safe and highly liquid investment options. Treasury bills and money market funds are cash equivalents.

Bank Savings Account

This is the most simple investment instrument available in the markets today. Most Americans have a savings account. A savings account is an account established at a financial banking institution which guarantees the depositor some kind of interest payment. This payment is often calculated on an annual or bi-annual basis. The total interest payment earned on a savings account depends on the offered interest rate and the total amount in the account. All savings accounts in the United States are insured by the National Insurance Corporation of America.

Certificates of Deposit
Certificates of deposit, often referred to as CDs, are investment accounts established by financial institutions such as banks for investment needs of individuals. Certificates of deposit pay considerably higher interest payments compared to savings accounts. They come with insurance provided by the National Insurance Depositors Corporation up to $100,000. One of the general characteristics of CDs is that when you buy a CD, you hold it for a predetermined period of time in order to earn the stated interest payment.

Stock Investment
A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings. When companies go public, they roll out stocks or shares after launching IPO.

Once these stocks are registered, they become available to investors.

When you buy a stock, the company registers a stock certificate in your name to cover your investment.

You may sell your stocks at any time.

Your stock market investment may or may not earn you money. Stocks generally go up in value over time, but they may also go down in value.

Mutual Funds
Type of professionally managed collective investment that pools money from many investors to purchase securities. A mutual fund is nothing more than a collection of stocks and/or bonds.

Run and managed by professional money managers. Two Types of Mutual Funds: Open-End Funds Close-End Funds

Hedge Funds
Hedge funds are advanced investment instruments for wealthy individuals. They are not available to all investors. Individuals interested in hedge fund investments must be qualified under the SEC laws.

The Securities and Exchange Commission (SEC) regulates all hedge funds. Hedge funds are run and managed by hedge fund managers.
Hedge fund managers may typically invest in stocks, bonds, derivatives, currencies, options, futures, real estate or any other asset class the manager deem suitable for investment purposes. Hedge fund managers charge two kinds of fees: annual fees and performances for their services.