The cash segment is a fundamental concept in stock markets and investment circles. It refers to the section of a financial market where actual securities such as shares are bought and sold for immediate delivery. Unlike derivatives or futures, the cash segment deals with direct ownership and transfer of assets.
## Meaning of Cash Segment
In the cash segment, transactions involve buying or selling stocks and other securities with full payment and immediate settlement. When an investor purchases shares in the cash segment, they pay the entire amount upfront, and the securities are transferred to their account after the settlement period (usually T+1 or T+2 days).
## Features of the Cash Segment
– **Direct Ownership:** Investors acquire actual shares and become shareholders.
– **Immediate Settlement:** Trades are settled quickly, typically within one or two business days.
– **No Leverage:** Full payment is required; margin trading is not allowed in the cash segment.
– **Transparency:** Prices are determined by real-time market supply and demand.
## Benefits of Trading in the Cash Segment
1. **Lower Risk:** Since there is no leverage, investors face less risk compared to trading in futures or options.
2. **Long-Term Investment:** Ideal for building a portfolio for long-term growth and dividend income.
3. **Simplicity:** The process is straightforward—investors buy, hold, and sell actual shares.
4. **Ownership Rights:** Investors enjoy voting rights and dividends as shareholders.
## Cash Segment vs. Derivatives Segment
| Feature | Cash Segment | Derivatives Segment |
|—————|——————-|————————|
| Ownership | Direct | Indirect (contract) |
| Settlement | T+1/T+2 | Expiry-based |
| Leverage | None | High |
| Risk | Lower | Higher |
| Investment | Long-term | Short-term/speculation |
## How to Trade in the Cash Segment
To trade in the cash segment, investors need a trading and demat account with a registered broker. After placing an order, the transaction is completed, and shares are credited to the investor’s demat account after settlement.
## Conclusion
The cash segment is perfect for investors seeking direct ownership, lower risk, and long-term wealth creation. Understanding its features and benefits helps investors make informed decisions and build a robust investment portfolio.
