In the vast world of the economy, there are countless businesses and people, each with their unique needs. Some have extra cash they want to save, while others are in need of money. Some entities are looking to meet short-term financial goals, while others are eyeing long-term investments. This diversity leads to a distinction in the financial market based on the time frame for lending or borrowing. Enter the money market, where funds move within a period of one year or less, catering to those with short-term liquidity needs. On the other hand, we have the capital markets, where the focus is on periods generally exceeding one year, ideal for those planning long-term capital investments.

• As a country’s economy expands, specialized institutions emerge to exclusively address capital needs, while traditional banks focus on money market activities.
• Institutions like insurance companies, housing finance firms, pension funds, and investment funds play a crucial role in mobilizing savings for long-term investments.
• Financial markets facilitate the exchange of financial instruments, determining asset prices through a price discovery process. They bring together buyers, sellers, borrowers, and lenders, enabling trade in various financial assets.
• Stock exchanges, akin to markets, were initially physical spaces with mediators facilitating deals for a commission. Today, they reflect the economic health, serving as primary channels for long-term savings mobilization and fixed capital formation.
• Savings in the form of insurance, provident funds, and pension savings collectively contribute to significant investment figures. These funds, with longer maturity periods, are well-suited for financing projects with extended gestation periods, such as infrastructure development.
• Savings in the form of insurance, provident funds, and pension savings collectively contribute to significant investment figures. These funds, with longer maturity periods, are well-suited for financing projects with extended gestation periods, such as infrastructure development.
• Angel investors, often friends or family, support small start-ups by providing one-time or ongoing investments. Their capital injection helps businesses navigate challenging early stages.
• Insurance spreads individual economic risks across a larger pool of people. It quantifies potential losses in monetary terms, making it a valuable tool for managing risks, such as life insurance covering economic hardships for survivors.
• Investors diversify their portfolios across various shares and sectors to minimize risks and maximize returns. Mutual funds offer a strategic approach to balancing investments in both debt and equity.
• Venture capital, a form of private equity, supports small, high-potential firms in their early stages. Investors take on the risk, hoping for successful outcomes and making venture capital a vital source of economic resource mobilization.

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