As an investor or potential investor in finance, it is important to have a full understanding of your market and have the right insight in order to make more informed decisions that will guarantee you the most returns. With this in mind, the financial market is essentially where you will spend most of your time. This is basically the place where financial investors buy, sell or trade in stocks, bonds, equities, currencies and derivatives.
Let’s take a look at 5 of the best financial market options for investors.
#1 TheCapital Market
A capital market is primarily the place where institutions or individuals either from the public or private sector go to raise funds through trading in financial securities. This market is made up of the primary and secondary capital markets which we talked about in our previous post. It offers investors a good buy in opportunity as the stocks or bonds are usually fairly priced.
#2 The Stock Market
The stock market offers an investor the opportunity to own a publicly traded company through buying of shares. It is usually a win-win for the investor and the company in that the investor gets a slice of the company as well as its profits whereas the company gets access to much needed capital to finance its operations. This market is also classified into primary and secondary market.
#3 The Bond Market
A bond is essentially a loan. In this market, an investor willoften loan out a certain amount of money to an institution which can either be private or government for a defined period and at an agreed fixed interest rate. The institution utilizes the money for its operations. Collectively, they are referred to as treasuries but are usually broken down into categories such as treasury, corporate, or municipal bonds,notes and bills.
#4 The Money Market
The money market is for investors looking to trade in short maturities with a high liquidity. Traders in this market often borrow or lend money in short term ventures that may range froma couple of days to probably just under a year. Through the money market, a company can be able to quickly raise money whereas an individual investor can have a short term place to put their money for safe keeping but with a good return.
#5 The Derivatives Market
The derivative market is for more experienced financial investors due to its complex nature. A derivative is essentially a type of contract in which the contract price is essentially determined based on the market price of the asset that is subject to the contract. Very technical indeed. Save this for when you become more seasoned as it can be very profitable.
There are many more financial markets available so as an investor whether seasoned or just beginning, your options are unlimited. Take your time learn them and find out which suit your needs best.
Be sure to reach out to us and we will take you step by step through the different financial markets and how they can work for you.