Investment vs. Speculation vs. Gambling - IndusWealth
But what about speculation, which lies somewhere between the two? The difference between gambling and investing has always been a matter of controversy. Investment, Speculation and Gambling: How are they different? to understand the difference between Investment, speculation and gambling. Speculation and gambling are two different actions used to increase wealth. However, the two are very different in the world of investing.
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The conceptual and empirical relationship between gambling, investing, and speculation
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Investment, Speculation and Gambling: How are they different? – Financial Fundaz
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Reserve Bank of Australia. The money market enables large sum of money to be transferred quickly and at a low cots from one economic unit businessgovtbank etc. Difference between Money Market and Capital Market: Money market is distinguished from capital market on the basis of the maturity period, credit instruments and the institutions: The money market deals in the lending and borrowing of short-term finance i.
The main credit instruments of the money market are call money, collateral loans, acceptances, bills of exchange. On the other hand, the main instruments used in the capital market are stocks, shares, debentures, bonds, securities of the government. Nature of Credit Instruments: The credit instruments dealt with in the capital market are more heterogeneous than those in money market.
Some homogeneity of credit instruments is needed for the operation of financial markets. Too much diversity creates problems for the investors.
Important institutions of the capital market are stock exchanges, commercial banks and nonbank institutions, such as insurance companies, mortgage banks, building societies, etc. The money market meets the short-term credit needs of business; it provides working capital to the industrialists.Investing vs Speculating
The capital market, on the other hand, caters the long-term credit needs of the industrialists and provides fixed capital to buy land, machinery, etc. The degree of risk is small in the money market. The risk is much greater in capital market. The maturity of one year or less gives little time for a default to occur, so the risk is minimised. Risk varies both in degree and nature throughout the capital market. The basic role of money market is that of liquidity adjustment. The basic role of capital market is that of putting capital to work, preferably to long-term, secure and productive employment.
Relation with Central Bank: The money market is closely and directly linked with central bank of the country. In the money market, commercial banks are closely regulated. In the capital market, the institutions are not much regulated. Explanation of Treasury Bills Money market instrument: They are zero risk instruments, and hence the returns are not so attractive. It is available both in primary market as well as secondary market. It is a promise to pay a said sum after a specified period.
T-bills are short-term securities that mature in one year or less from their issue date. They are issued with three-month, six-month and one-year maturity periods.
The Central Government issues T- Bills at a price less than their face value par value. They are issued with a promise to pay full face value on maturity. So, when the T-Bills mature, the government pays the holder its face value. The difference between the purchase price and the maturity value is the interest income earned by the purchaser of the instrument.
T-Bills are issued through a bidding process at auctions. The bid can be prepared either competitively or non-competitively. In the second type of bidding, return required is not specified and the one determined at the auction is received on maturity. Whereas, in case of competitive bidding, the return required on maturity is specified in the bid.
In case the return specified is too high then the T-Bill might not be issued to the bidder. At present, the Government of India issues three types of treasury bills through auctions, namely, day, day and day. There are no treasury bills issued by State Governments.
Treasury bills are available for a minimum amount of Rs. While day T-bills are auctioned every week on Wednesdays, day and day T-bills are auctioned every alternate week on Wednesdays. It also announces the exact dates of auction, the amount to be auctioned and payment dates by issuing press releases prior to every auction.
T-bills auctions are held on the Negotiated Dealing System NDS and the members electronically submit their bids on the system.
RBI issues these instruments to absorb liquidity from the market by contracting the money supply.