It is a term that describes the part ownership of a company and is also known as share. Each share that one buys in a company is worth a sum based on the overall worth of the company. For instance, if Rs 1 lakh is the worth of a company and it has 1000 shares; each stock is worth Rs 100. If X has 10 stocks in this company, he owns 1 per cent in the company. As owner of a stock in a company, X is entitled to a share of the company&rsquo;s earnings and profits. X also has proportionate voting rights in decisions taken by the company that come up for a vote and is known as shareholder in the company.&nbsp; 
Example: Reliance Industries Ltd, listed on the BSE closed at Rs 2,108.75&nbsp;on March 15, 2021.

Stocks and Shares

Unlike shares, debentures are like a loan that a company borrows for medium-term to long-term at a fixed rate of interest at the time of issuing debentures. Companies that are on a growth path or expansion go for debentures instead of borrowing from traditional institutions such as banks. Think of these as loans that are repayable on a fixed date.&nbsp;

Although as a debenture holder, one has rights over the company&rsquo;s assets against which the debentures are issued, but unlike shareholders, debenture holders do not get a share in the company&rsquo;s profits or dividends. There are different types of debentures based on the way they are structured, which could be convertible to shares at a later date or non convertible, which means that the company will repay the loan with interest at the end of a specified period.&nbsp; 
Example: Muthoot Fincorp Ltd&rsquo;s NCD was listed for Rs 986 on Feb 3, 2021.

Debentures

It is an investment vehicle that gathers money from a pool of investors to invest in different types of mutual fund schemes based on their stated investment objective. There are several types of mutual funds as categorized by the market regulator SEBI and broadly classified as equity-oriented schemes, debt-oriented schemes, hybrid schemes and special schemes. There are in all 36 categories of mutual funds that are offered by over 40 different AMCs (asset management companies).

Mutual fund schemes are run by professional fund managers who have the experience and expertise to handle large scale monies for efficient returns. They have a low entry cost, and one can start investing with just Rs 500 and investments are converted into units, with each investor referred to as a unit holder in the fund that they invest in. Remember, the gains (or losses) on the investment in a mutual fund scheme are shared collectively by all investors in proportion to their contribution to the fund. 
Example: Aditya Birla Sun Life Frontline Equity Regular Fund had an NAV of Rs 286.68 on March 15, 2021.

Mutual Funds

Unit Linked Insurance Policies (Ulips) are a combination of insurance and investment. They act as a protection cum wealth creation tool that can be used for future financial goals. The premiums paid towards a Ulip is split into two components &ndash; one part goes towards the risk cover and the balance is allocated towards investment instruments through a choice of fund schemes. The fund schemes offered by Ulips vary from insurance company to insurance company, but the choice range of funds are equity-oriented, debt-oriented or hybrid.&nbsp;

Ulips define the death benefit that a policyholder&rsquo;s dependents would receive under the policy in case of death and in case of maturity; the value of the Ulip is what the policyholder can claim. The returns on your investments depend upon the performance of the fund opted by you. The flexibility of Ulips lets you choose the premium you wish to pay and appropriately get the minimum insurance and savings or wealth creation opportunity. The premiums paid towards Ulips qualify for tax deduction under Section 80C, but the same comes with a lock-in of five years to claim this benefit, which means on completion of five years, you as a policyholder can withdraw from the Ulip.&nbsp; 
Example: The NAV of HDFC Life Bluechip fund101 for HDFC Life Click 2 Invest &ndash; ULIP was Rs 30.326 on March 15, 2021.

ULIPs

Commodity is a set of goods that can be exchanged and moved from one place to another physically. They are broadly categorised into four sub categories &ndash; metals (silver, gold, platinum, and copper etc), energy (crude oil, natural gas, gasoline, and heating oil, etc), agriculture (corn, beans, rice, wheat, etc) and livestock &amp; meat (eggs, pork, cattle, etc).

The regulatory body for commodities trading is the FMC (Forward Market Commission), which merged with the SEBI (Securities and Exchange Board of India) in 2015. There are several commodity exchanges like the stock exchange (BSE &amp; NSE) such as MCX (Multi Commodity Exchange), NCDEX (National Commodity and Derivatives Exchange), ICX (Indian Commodity Exchange) etc.

These exchanges require standard agreements as per regulations so that trades can be executed without actual inspection. The NSE and BSE offer derivative contracts in both equity and commodity segments whereas MCX, NCDEX and ICX offer derivative contracts in commodity segments only. Likewise, the NCDEX offers contracts primarily in agriculture products and ICX offers contracts in agricultural commodities including plantation and non agricultural (diamond and steel). 
Example: Spot price of I barrel crude oil in Mumbai was Rs 4,750 on March 15, 2021

Commodity 

Debt instruments issued by the government to borrow money are clubbed as government securities. These could be for short-term and mature in 91, 182 or 364 days as well as those that are long-term in nature with maturities anywhere over 5 years and going as high as 40 years.&nbsp;

As these securities are issued by the government of India in the form of bonds and treasury bills (T-Bills) they have almost zero risk with no default. These are also tradable and may also be issued by state governments and known as G-Sec. The bonds issued by state governments are known as State Development Loans (SDLs).

Until recently, small investors could only invest indirectly in G-secs through investments in mutual funds or through policies issued by life insurance firms that invested in G-secs. In recent times, to encourage direct investment by retail investors, the government and the RBI have taken steps and introduced purchase of government bonds through the demat account of investors, where stock exchanges facilitate the bids posed by small investors.&nbsp; 
Example: GOI LOAN 7.94% 2021 was traded at Rs 100.8262 on March 15, 2021 with a last annualised trade yield of 3.385%.

Government Securities

These are fixed term deposits with a fixed interest rate issued by the corporate group of a company and may have a tenure of a few months to a few years. Corporate FDs are similar in structure to bank FDs; however, unlike bank FDs, these deposits are less secure. The risk associated with such deposits is offset by the higher interest offered by such deposits than what a bank offers for a similar deposit.

As an investor you may be tempted to consider a higher interest paying FD over what the bank pays. However, you should know that companies offering corporate FD are given a rating which could be AAA, which is the best rating or AA, BBB etc. These ratings are assigned by rating agencies such as CRISIL, CARE etc based on several financial factors of the company or corporate which is offering the FD. Ratings ensure some safety for depositors, as the regulator has made it mandatory for companies collecting deposits to maintain a minimum BBB rating to collect deposits from the public. Check the company&rsquo;s rating before putting your money in its FD. 
Example: HFDC Ltd company FD with CRISIL- FAAA &amp; ICRA &ndash; MAAA rating for 5-year is available at 6.20% from Feb 13, 2021.

Corporate FD or Company FD

Typically currency is the Indian rupee that we deal in. But the way deal in stocks and commodities, there is a market to deal in currency trading, in which trades happen in foreign currency. An international currency market involves participants from around the world who buy and sell different currencies. Trading in currencies is mostly undertaken by central banks (RBI), banks, corporations, forex brokers and even retail investors. One can profit by hedging currency prices and many small investors have found success when trading in currencies.

There are two main types of currency markets &ndash; spot or cash market and the futures market, where currency futures are traded. Currency futures is the preferred way to do&nbsp;currency trades in India, which are cash settled, which means there is no actual delivery of currency on expiry of the futures contract.

Currency futures are traded on platforms offered by exchanges like the NSE, BSE and MCX-SX. You need to open a forex trading account with a broker to do trading in the live currency market. Most widely traded currency futures in India are on Euro-US$, British Pound-US$ and US$-Japanese Yen. 
Example: USDINR21MAR71.0000PE expiring on March 26, 2021 was 0.0050 with a marklet lot of 1000.

Currency 

Derivatives mean an off-shoot and that is exactly what these are. Derivative is a product whose value is derived from the value of an underlying asset. This underlying entity could be equity, commodity, currency and even interest rates. Derivative as a financial instrument is not real, it is a financial tool used for hedging, speculation and arbitrage opportunities. As the value of the underlying asset changes, so does the value of derivatives.

There are two types of derivatives &ndash; Futures and Options. A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. An&nbsp; 
Option is a contract which gives the right, but not an obligation, to buy or sell the underlying at a stated date and at a stated price. While a buyer of an option pays the premium and buys the right to exercise his option, the writer of an option is the one who receives the option premium and therefore obliged to sell/buy the asset if the buyer exercises it on him.

You can use derivatives in many ways, for example, you own 100 shares in a company, which you have invested with its current price being Rs 120. But, there are changes that in six months the price is likely to fall, yet you don&rsquo;t wish to sell your holdings now. You also wish to have a minimum Rs 120 from each share and no less. At the same time, if the price goes above Rs 120, you wish to benefit from the rise in price above Rs 120. You could use derivatives by paying a small price by buying a derivative contract known as &lsquo;Option&rsquo; that incorporates your needs. This way, you reduce your losses, and benefit, whether or not the share price falls. You are, thus, hedging your risks, and transferring them to someone who is willing to take these risks. This is one aspect of using derivatives.

Derivatives

Crypocurrency is a digital currency that is used in trading and transactions, which is similar to paper currency; but it is paperless. It is also decentralised and is not regulated by any government or group of governments. It works on the principles of cryptography, which is the use of codes that only those who create and for whom it is meant understand them.

Cryptocurrency is designed to work as a medium of exchange. Bitcoin (BTC), Litecoin (LTC), Ethereum (ETH), Bitcoin Cash, Ethereum Classic, Zcash (ZEC), Stellar Lumen (XLM) and Bitcoin Satoshi&rsquo;s Vision (Bitcoin SV) are the top 8 cryptocurrencies. There are many other terminologies used in cryptocurrency such as mining and blocks. However, at present these are not regulated or recognized as legal currency by the Indian government and banking regulator RBI.

Financial Instruments

Stocks and Shares