i

ntr
oduc
tion
T
his doc
ume
ntsr
efe
rst
ofi
nanc
ialse
rvi
cest
hat
banks pr
ovi
de wi
thi
n a si
ngl
ecount
ry.T
hese
ope
rat
ions ar
e gov
erne
d by t
he l
ocall
aws and
r
egul
ati
onsc
api
talmar
keti
sa f
inanc
ialmar
ket
whe
rel
ong-
ter
m de
btore
qui
ty-
bac
kedse
cur
iti
es
ar
eboughtandsol
d. i
nthene
xtpageI
tdi
scuss
aboutpr
imar
il
yuse
dforr
aisi
ngf
undsf
orl
ong-
t
erm i
nve
stme
nts por
tfol
i
o &a c
oll
ect
ion of
v
ari
ousf
inanc
ialasse
tshe
ldbyani
nve
stor
.fi
nal
l
y
me
nti
on T
hepur
poseofc
onst
ruc
ting a por
tfol
i
o
whi
chi
sto ac
hie
vea bal
anc
ebe
twe
enr
isk and
r
etur
nthat al
i
gns wi
tht
he i
nve
stor
'sf
inanc
ial
goal
s.I
n i
nve
stme
nt t
erms,a we
ll
-di
ver
sif
ied
por
tfol
i
o c
an mi
ti
gat
e r
isks whi
l
e opt
imi
zi
ng
pot
ent
ialr
etur
ns.

1
1DomesticandInternationalBankingOperations
Dome
sti
cbanki
ng ope
rat
ions r
efe
rtot
hef
inanc
ialac
tiv
iti
esc
onduc
ted wi
thi
n a si
ngl
ecount
ry,
se
rvi
ngt
hene
edsofl
ocalc
ust
ome
rsandbusi
nesse
s.T
heseope
rat
ionsi
ncl
udede
posi
t-t
aki
ng,l
endi
ng,
andpr
ovi
dingv
ari
ousf
inanc
ialse
rvi
cessuc
hasc
hec
kingac
count
s,sav
ingsac
count
s,andl
oanst
o
dome
sti
ccl
i
ent
s.

On t
heot
herhand,i
nte
rnat
ionalbanki
ngope
rat
ionsi
nvol
vef
inanc
ialac
tiv
iti
est
hatspan
ac
rossmul
ti
plec
ount
rie
s.T
hisi
ncl
ude
sse
rvi
cessuc
hasi
nte
rnat
ionalt
radef
inanc
e,f
ore
ign
c
urr
enc
yex
change
,cr
oss-
bor
derl
endi
ng,andf
aci
l
itat
ing gl
obalt
ransac
tions.I
nte
rnat
ional
banks al
so pr
ovi
de se
rvi
cesl
i
ke t
rade f
inanc
e,f
ore
ign e
xchange
,and i
nte
rnat
ionalf
und
t
ransf
erst
ofac
il
it
ategl
obalbusi
nessac
tiv
iti
es.

I
nsummar
y,dome
sti
cbanki
ngope
rat
ionsf
ocusonse
rvi
ngt
hef
inanc
ialne
edsofc
ust
ome
rs
wi
thi
n asi
ngl
ecount
ry,whi
l
eint
ernat
ionalbanki
ngope
rat
ionsi
nvol
vepr
ovi
dingf
inanc
ial
se
rvi
cesandsuppor
tforc
ross-
bor
dert
ransac
tionsandgl
obalbusi
nessac
tiv
iti
es.

2Di
ffer
ent
iat
ecapi
talmar
ketfr
ommonet
arymar
ket
Mone
y mar
ket
sar
eforshor
t-t
erm i
nve
stme
nts,usual
l
y oneye
arorl
ess,whi
l
ecapi
tal
mar
ket
s ar
efor l
ong-
ter
m i
nve
stme
nts,of
ten be
yond one ye
ar.Mone
y mar
ket
s ar
e
ge
ner
all
yle
ssr
iskyt
hanc
api
talmar
ket
s,butc
api
talmar
ket
sof
ferhi
ghe
rre
tur
ns.

Mone
ymar
ket
sde
ali
nshor
t-t
erm de
bti
nst
rume
nts,
usual
l
yforoneye
arorl
ess.
It'
swhe
re
gov
ernme
nts,banks,and l
argec
orpor
ati
ons go t
o managet
hei
rimme
diat
ecash ne
eds.
Capi
talmar
ket
sinv
olv
elong-
ter
m se
cur
iti
es,
suc
hasst
ocksandbonds,
thatmat
urei
nmor
e
t
hanoneye
ar.

MoneyMar
ket
svs
.Capi
talMar
ket
s:
Mone
y and c
api
talmar
ket
s ar
efundame
ntalt
othe e
conomy,se
rvi
ng i
nve
stor
s and
busi
nesse
sal
i
ke.Mone
ymar
ket
sde
ali
nshor
t-t
erm de
bti
nst
rume
nts,usual
l
yforoneye
ar
l
ess.I
t'
swhe
regov
ernme
nts,banks,andl
argec
orpor
ati
onsgot
omanaget
hei
rimme
diat
e
c
ashne
eds.Capi
talmar
ket
sinv
olv
elong-
ter
m se
cur
iti
es,suc
hasst
ocksandbonds,t
hat
mat
urei
nmor
ethanoneye
ar.T
hisi
swhe
rec
ompani
esandgov
ernme
ntsr
aisef
undsf
or
maj
orpr
oje
ctsandl
ong-
ter
m gr
owt
h.

2
Mone
ymar
ket
sar
ethel
i
febl
oodofday-
to-
dayf
inanc
ialope
rat
ions,whi
l
ecapi
talmar
ket
s
sust
ainl
ong-
ter
m e
conomi
cgr
owt
h.T
hey di
ffe
rint
hre
e ways:t
he t
ype
s off
inanc
ial
i
nst
rume
ntst
rade
d,t
hedur
ati
on ofi
nve
stme
nts,andt
hel
eve
lofr
isk.W hi
l
ethemone
y
mar
ketpr
ior
iti
zesl
i
qui
dit
yandsaf
ety,t
hec
api
talmar
ketof
fer
sthepot
ent
ialf
orhi
ghe
r
r
etur
nswi
thi
ncr
ease
dri
sk.Be
low,we
'l
lex
plor
eeac
hmar
ket
'sc
har
act
eri
sti
csandhow t
hey
wor
k.

Mone
ymar
ket
sinv
olv
eshor
t-t
erml
endi
ngt
hatbor
rowe
rsc
ant
api
ntof
orc
ashf
orday-
to-
dayope
rat
ions

Capi
talmar
ket
sar
ege
are
dtowar
dlong-
ter
minv
est
ing.

Mone
ymar
ket
sar
ele
ssr
iskyt
hanc
api
talmar
ket
s,whi
chc
anbemor
ere
war
ding.

Bot
hmar
ket
sar
esubj
ectt
ocompr
ehe
nsi
ver
egul
ati
ont
oensur
etr
anspar
enc
y,f
air
ness,
and
st
abi
l
ity.

MoneyMar
ket
s

Mone
ymar
ket
sar
eme
antf
orshor
t-t
erml
endi
ngandbor
rowi
ng,
usual
l
yforaye
arorl
ess.
I
t’
sli
keaf
astl
anewhe
rebusi
nesse
s,gov
ernme
nts,
andf
inanc
iali
nst
itut
ionsc
anme
ett
hei
r
qui
ckf
undi
ngne
eds.T
hus,i
tisi
mpor
tantf
orl
i
qui
dit
ymanage
ment
.The
semar
ket
sar
e
knownf
ort
hei
rhi
ghl
i
qui
dit
y,ge
ner
all
ylow r
isk,
ande
aseofac
cesst
ocapi
tal
.

TypesandEx
ampl
esofMoneyMar
ket
s:
Mone
ymar
ket
spl
ayac
ruc
ialr
olei
nthef
inanc
ialsyst
em,pr
ovi
dingapl
acef
ori
nst
itut
ions
andi
ndi
vi
dual
stopar
kcashsaf
elyf
orshor
tpe
riods.T
hesemar
ket
sde
ali
n hi
ghl
yli
qui
d,
shor
t-t
erm de
bti
nst
rume
nts,t
ypi
cal
l
ywi
thmat
uri
ti
esofoneye
arorl
ess.Le
t'se
xpl
oret
he
mai
ntype
sofmone
ymar
keti
nst
rume
ntsandhow t
heyf
unc
tion.

Gov
ernme
ntmone
ymar
ketf
undspr
imar
il
yinv
esti
nshor
t-t
erm se
cur
iti
esi
ssue
dbyt
he
U.
S.gov
ernme
nt,suc
h as T
-bi
l
ls and ot
her gov
ernme
nt-
bac
kedi
nst
rume
nts.T
hey ar
e
c
onsi
der
edv
erys
afeandl
iqui
d,o
ffer
ingal
oweryi
eldb
utg
reat
ers
ecur
ityc
ompar
edwi
th
pr
imefunds
.

3
Capi
talMar
ket
s

Capi
talmar
ket
spl
ayav
italr
olei
nec
onomi
cgr
owt
hbyc
hanne
li
ngsav
ingsi
ntopr
oduc
tiv
e
i
nve
stme
nts.T
heyar
ewhe
rel
onge
r-t
erm se
cur
iti
esar
eboughtandsol
d.Compani
esand
gov
ernme
ntsr
aisef
undsbyi
ssui
ngst
ocks(
equi
ti
es)andbonds(
fi
xed-
inc
omese
cur
iti
es)
.
I
nve
stor
scane
arnr
etur
nsv
iav
alueappr
eci
ati
onordi
str
ibut
ions.

T
ransac
tionse
nabl
eindi
vi
dual
sandi
nst
itut
ionst
otapi
ntof
utur
eoppor
tuni
ti
es.I
nve
stor
s
buyl
ong-
ter
minst
rume
ntsl
i
kest
ocksandbondsf
rom i
ssue
rsi
npr
imar
ymar
ket
sort
rade
t
hemi
nse
condar
ymar
ket
s.T
hishe
lpsc
ompani
esandgov
ernme
ntsge
tthef
undst
heyne
ed
f
orv
ari
ous pr
oje
cts and obj
ect
ive
s.I
nve
stor
s hope t
o ge
tre
tur
ns t
hrough di
vi
dends or
i
nte
restandpot
ent
ialappr
eci
ati
on.

Buye
rsandse
ll
ersar
emat
che
dthr
ough e
xchange
sorov
er-
the
-count
er(
OTC)pl
atf
orms.
Br
oke
rsandde
ale
rspl
ayake
yrol
einf
aci
l
itat
ingt
ransac
tionsandke
epi
ngt
hingssmoot
h.
Pr
ici
ngi
nthec
api
talmar
ket
sisdr
ive
n bysuppl
yandde
mand,i
nve
storse
nti
ment
,and
e
conomi
cindi
cat
ors.

F
aci
l
itat
ingt
het
radeoff
inanc
ialasse
tshe
lpsse
tasse
tpr
ice
sande
nsur
esac
ert
ainde
gre
e
ofl
i
qui
dit
y,al
l
owi
ngf
undst
omov
esmoot
hly.Conse
que
ntl
y,t
hismar
ketunde
rpi
nsbusi
ness
e
xpansi
onandbol
ste
rst
heov
eral
lec
onomy.

TypesandEx
ampl
esofCapi
talMar
ket
s:
Capi
talmar
ket
scanbebr
oke
ndowni
ntot
hepr
imar
yandse
condar
ymar
ket
s.T
hepr
imar
y
mar
keti
swhe
rene
w se
cur
iti
esar
esol
dfort
hef
irstt
ime
,suc
haswhe
nac
ompanygoe
s
publ
i
cwi
thani
nit
ialpubl
i
cof
fer
ing(
IPO)
.

T
hisal
l
owsc
ompani
est
orai
sec
api
taldi
rec
tlyf
rom i
nve
stor
swhobuyt
hesene
w shar
es.

Equi
tySe
cur
iti
es:Compani
esof
ferowne
rshi
pst
ake
stot
hepubl
i
cfort
hef
irstt
imet
hrough
I
POs.Pr
ivat
ecompani
esc
anbe
comepubl
i
clyt
rade
d.Compani
esc
anal
soc
onduc
tfol
l
ow-
on
of
fer
ings,
issui
ngaddi
ti
onalshar
est
orai
semor
ecapi
talaf
tert
hei
rIPO.
Foramor
ese
lec
tiv
e
appr
oac
h,pr
ivat
epl
ace
ment
sal
l
ow c
ompani
est
ose
llshar
esdi
rec
tlyt
oal
i
mit
ednumbe
rof
i
nve
stor
s,of
teni
nst
itut
ionalbuye
rsorac
cre
dit
edi
ndi
vi
dual
s.

4
De
bt Se
cur
iti
es:Ent
iti
esc
an bor
row mone
y by i
ssui
ng bonds i
n t
he de
bt mar
ket
.
Cor
por
ati
ons i
ssue c
orpor
ate bonds t
ofund ope
rat
ions or e
xpansi
on.Gov
ernme
nts
par
tic
ipat
etoo—t
hef
ede
ralgov
ernme
nti
ssue
sTr
easur
yse
cur
iti
es,and st
ate
sand c
iti
es
of
fermuni
ci
palbondst
ofi
nanc
epubl
i
cpr
oje
cts.Someoft
hec
ompl
exde
btse
cur
iti
esi
ncl
ude
asse
t-bac
kedse
cur
iti
es(
ABSs)andmor
tgage
-bac
kedse
cur
iti
es(
MBSs)
.

Hybr
id Se
cur
iti
es:Br
idgi
ng t
he gap be
twe
en st
ocks and bonds,hybr
id se
cur
iti
es of
fer
f
eat
ure
sofbot
h.Conv
ert
ibl
ebondsst
artasde
btbutc
an bec
onv
ert
edi
ntost
ockunde
r
c
ert
ainc
ondi
ti
ons.Pr
efe
rre
dst
ock,anot
herhybr
id,t
ypi
cal
l
yof
fer
sfi
xeddi
vi
dendsl
i
kebonds
butr
epr
ese
ntsowne
rshi
pli
kec
ommonst
ock.

3Whati
sthemeani
ngofpor
tfol
ioi
ninv
est
ment
?

Apor
tfol
i
oisac
oll
ect
ionoff
inanc
iali
nve
stme
ntsl
i
kest
ocks,bonds,c
ommodi
ti
es,c
ash,and
c
ashe
qui
val
ent
s,i
ncl
udi
ngc
lose
d-e
ndf
undsande
xchange
-tr
ade
dfunds(
ETF
s)

Por
tfol
i
othe
oryi
sa f
inanc
ialappr
oac
hthatf
ocuse
s on mi
nimi
zi
ng r
isk ormax
imi
zi
ng
r
etur
nbyc
ombi
ningasse
tswi
thdi
ffe
rentr
iskc
har
act
eri
sti
csi
ntoadi
ver
sif
iedpor
tfol
i
o.I
t
c
onsi
der
sthec
ont
ribut
ionofe
achasse
ttot
heov
eral
lvar
ianc
eoft
hepor
tfol
i
o.

W hati
sinv
est
mentpor
tfol
i
o?

An i
nve
stme
ntpor
tfol
i
ooraf
inanc
ialpor
tfol
i
oisabaske
toff
inanc
ialasse
tst
hatmay
i
ncl
udest
ocks,
bonds,
mone
ymar
keti
nst
rume
nts,
cashandc
ashe
qui
val
ent
s,c
ommodi
ti
es,
.

I
mpor
tanceofani
nvest
mentpor
tfol
io:

Fol
lowi
ngar
esomeoft
hebenef
it
sofcr
eat
ingani
nvest
mentpor
tfol
iowi
thappr
opr
iat
emi
xof
asset
s:

Pot
ent
ial

5
Wi
thoutani
nve
stme
ntpor
tfol
i
oinpl
ace
,inv
est
orsmi
ghtbeunpr
epar
edf
orse
ver
almaj
or
mi
l
est
one
sint
hei
rli
fe.Apor
tfol
i
owi
thanappr
opr
iat
e(di
ver
sif
ied)mi
xofi
nve
stme
ntsnot
onl
yhe
lpsani
ndi
vi
dualpr
ote
cthe
r/hi
sinv
est
edc
api
talbutal
soal
l
owst
hemt
oposi
ti
oni
tin
awayt
hati
thast
hepot
ent
ialt
oear
nde
sir
abl
ere
tur
ns.I
nthel
ongt
erm,t
hiswi
l
lal
l
ow
i
nve
stor
stoac
hie
vet
hei
rvar
iousf
inanc
ialgoal
s,suc
h aspl
anni
ng f
ort
hei
rre
tir
eme
nt,
f
undi
ngac
hil
d’
seduc
ati
on/
mar
riage
,et
c.

I
ncome
By de
vel
opi
ng an i
nve
stme
ntpor
tfol
i
othatc
ent
res ar
ound i
ncome se
cur
iti
es,one c
an
suppl
eme
ntt
hei
rinc
omei
nthef
utur
e.F
ori
nst
anc
e,whe
nyoude
dic
ateaf
rac
tionofasse
ts
t
odi
vi
dend-
payi
ngst
ocks,youmayc
reat
east
abl
einc
omest
ream.St
ockdi
vi
dendsar
enot
usual
l
yassur
edbutc
ert
ainc
ompani
esmakeuni
nte
rrupt
edpayme
ntsov
ert
ime
.Youc
an

al
soi
nve
sti
nbondst
oge
ner
atei
ncome
,ast
hesef
ixe
d-i
ncomese
cur
iti
esge
ner
all
ymake
r
egul
ari
nte
restpayme
ntsov
ert
het
enur
eoft
hei
nve
stme
nt*
*.

Di
ver
sif
icat
ion
Hav
ingaf
inanc
ialpor
tfol
i
obyi
tse
lfi
snote
nough.
Ani
nve
stormustj
udi
ci
ousl
yal
l
ocat
ethe
ir
c
api
talt
ore
apt
hebe
nef
itsofbe
inge
xpose
dtot
her
iskoft
hef
inanc
ialmar
ket
s.Byc
reat
ing
adi
ver
sif
iedf
inanc
ialpor
tfol
i
othati
sspr
eadac
rossv
ari
ousi
nve
stme
ntc
ate
gor
ies,
inv
est
ors
c
anr
eapt
hebe
nef
itsofdi
ver
sif
icat
ion.Di
ver
sif
icat
ionac
rossmul
ti
pleasse
tcl
asse
she
lpst
o
pr
ote
ctani
nve
stor
'sc
api
tali
fonese
ctoroft
hef
inanc
ialmar
ketdoe
snotpe
rfor
m we
ll
.

Di
ff
erentcomponent
sofani
nvest
mentpor
tfol
io

St
ocks

St
ocksar
eoneoft
hemostc
ommonc
ompone
ntsofani
nve
stme
ntpor
tfol
i
o.T
heyar
ea
r
epr
ese
ntat
ionoft
het
otalshar
ecapi
talofagi
venc
ompanyt
rade
dov
ert
hest
ocke
xchange
s.
T
hus,i
fyouar
eashar
ehol
der
,itme
anst
hatyouownast
akei
nthec
ompany.T
hesi
zeof
t
heowne
rshi
pst
akei
sde
ter
mine
dbyt
henumbe
rofshar
esani
ndi
vi
dualowns.

6
Bonds

Bondsar
einv
est
mentse
cur
iti
est
hatal
l
ow t
hei
nve
stort
ole
ndmone
ytot
hegov
ernme
nt,
anage
ncy,orac
ompanyf
oraf
ixe
dpe
riodoft
imei
nli
euofr
egul
ari
nte
restpayme
nts.
Bondshav
eaf
ixe
dmat
uri
tydat
e,postwhi
cht
hepr
inc
ipalamounti
sre
tur
nedt
oinv
est
ors
wi
thi
nte
rest
.Asc
ompar
edt
ost
ocks,
bondsar
ecompar
ati
vel
yle
ssr
iskybutal
soof
ferl
owe
r
pot
ent
ialr
etur
ns.

Al
ter
nat
einv
est
mentopt
ions

Ani
nve
stme
ntpor
tfol
i
ocanal
soc
ont
ainal
ter
nat
einv
est
ment
s,i
.
e.asse
tswhosev
aluec
an
gr
ow andmul
ti
ply,
suc
hasoi
l
,re
ale
stat
e,gol
d,e
tc.
Usual
l
y,al
ter
nat
einv
est
mentopt
ionsar
e
notaswi
del
ytr
ade
dast
radi
ti
onali
nve
stme
ntssuc
hasbondsandst
ocks.

Conc
lusi
on:

I
nconc
lusi
on,unde
rst
andi
ngdome
sti
candi
nte
rnat
ionalbanki
ngope
rat
ionsi
scr
uci
alf
or
gr
aspi
nghow f
inanc
ialsyst
emsf
unc
tiongl
obal
l
y.Di
ffe
rent
iat
ingbe
twe
enc
api
talmar
ket
s
andmone
ymar
ket
she
lpsc
lar
ifyt
hei
rdi
sti
nctr
ole
sinf
inanc
e.Mor
eov
er,r
ecogni
zi
ngt
he
si
gni
fi
canc
e of a we
ll
-const
ruc
ted por
tfol
i
o al
l
ows i
nve
stor
sto opt
imi
zer
etur
ns whi
l
e
managi
ng r
isks e
ffe
cti
vel
y.By l
eve
ragi
ng c
onc
ept
s f
rom e
stabl
i
she
d l
i
ter
atur
e l
i
ke
"
I
nve
stme
nts,
"inv
est
orsc
an make i
nfor
med de
cisi
ons t
hat al
i
gn wi
tht
hei
rfi
nanc
ial
obj
ect
ive
s,ul
ti
mat
elyl
eadi
ngt
omor
esuc
cessf
uli
nve
stme
ntout
come

Refer
enc
eBo
oks
:

1."Inv
est
ment
s"b
yZv
iBo
die,Al
exKane,andAl
anJ.Mar
cus

2."Po
rtfo
lioCo
nst
ruc
tio
n:APr
act
icalGui
de"b
yDav
idAl
len