Financial literacy has globally increased in the past years and has resulted in more people investing their money in the financial market. If you are one of those individuals who are just starting to learn more about this, you should first understand the kinds of markets you can invest in.
A stock is an investment that represents ownership in a company. When you buy a company’s stock, you are getting a fraction of the company called a “share”. A share entitles the stockholder to a part of the corporation’s profits and assets. Stocks are sold by corporations to keep their businesses going and are usually bought on stock exchanges. Investing in stocks has given tremendous returns to investors, but stock markets can also go down and incur losses.
When you invest in stocks, your earnings grow with the economy. Stocks are also easy to buy. The stock market has made buying of shares convenient for potential investors. You can either purchase stocks online or from a broker. At the same time, stocks are easy to sell. This is very advantageous if you unanticipatedly need money all of a sudden.
By investing in stocks, you can also make money in two ways. You can either buy the stock at a low price then sell it high. Another way is by buying stocks from companies that pay dividends at the end of a certain period.
Forex, or foreign exchange, is the process of changing one currency to another usually for tourism, commerce, or trade. Due to the global exchange of goods and its related activities, the forex market is easily the largest one in the world.
The forex market is where currencies are bought and sold. Currencies need to be exchanged to allow international trade and business partnerships. There are three ways to do forex trading. First is through the spot market where currencies are bought and sold according to its current price. Then there are the forward and futures markets which are similar in many ways as both hold an agreement between two parties to allow buying and selling in the future. However, a forward contract is private, personalized, and traded via over-the-counter transactions. A futures contract on the other hand has definite terms and is traded on an exchange.
Trades happen non-stop as traders all over the world buy and sell currencies at any time of the day, thus making forex a great investment for beginners because it is easy to understand and does not require a huge capital. Since the forex trading is influenced by many factors such as global economic stability, current events, natural disasters, and many others, its movement can be highly volatile.
Cryptocurrency trading is an internet-based exchange of virtual currency that uses cryptographic functions to handle financial transactions. These currencies can be sent and received by two parties using public and private keys with a small amount of fees.
Cryptocurrencies are not handled or managed by any governing authority, thus being free from external interference. It has also become a reliable alternative to financial exchanges or transactions in business dealings because of its simple and straightforward process.
As you see, financial markets encourage you to become more aware and involved in the movement of our global economy. It is a great way to learn for your own personal or professional growth and to help the corporations you hold in high regard. Financial investments can be rewarding and satisfying if you know the hows and whys.