Different types of Markets for Investors

Part 1

When you put the word "investing" before someone, usually the first thing that will come to that person's mind is "Stocks or Equity Markets". To a few others the word "Real Estate" might pop up. But this is as far as it will go for most people. This is because these are some of the popular markets where investors put their money in. However, these are not the only ones around. If you are seriously into investing then it would be good to have a high-level background of the markets out there in the world.

Below you will find some of the different types of markets present in the world today that are  used by investors or traders to generate wealth.

Stock Market(115480)

Stock or Equity Markets

In this market you can trade or invest in shares of various public companies. Most investors or traders prefer to put their money into this market. One of the key reasons is that there is a wide variety of assets available that you can buy and sell. The choice out there is huge.

Also you can invest in assets that internally track the progress of a commodity. For example, instead of buying a commodity like Oil, it would be better for you to invest in a group of companies that sells oil.

Bond Market

Fixed Income Markets

An example of fixed income markets is the bond markets. You can either buy government bonds or bonds put forward by companies. Usually a bond will have Principal and an interest. The principal or face value is the money you have to pay upfront to own the bond. The interest is the percentage of the face value you will get every year.

For eg; a bond with a face value of $5000 and interest 10% will earn you $500 every year. With every bond, there would also be a validity period. After this validity period the company or government from which you purchased the bond will pay back the principal amount to you. Once the validity period gets completed you no longer will receive the interest amount.




Foreign Exchange Markets

Foreign Exchange Market is a market where you can exchange currencies. The logic is similar to that of the stock market, and it is essential that novice traders must stay out of the currency market. It would be better for them to get experience in equity markets before starting in the FOREX market.

However, one of the reasons why the FOREX market is of great attraction to traders is that they make a lot of money (or lose a lot) by exchanging positions. Because most positions held in the FOREX market are done with high leverage, the potential to make money is high. Also there is always movement in these markets and volume of trading is also very high. Because it is not just traders who are involved. Big institutions, governments and treasuries of various countries are daily selling and buying currencies.

If you have more than 3 years experience in the Equity Market and have had more than average success, then you can also try your hand in FOREX. However, if you are the kind of person that loses most of your investment, then FOREX won't be for you. Take this advice or you can get your hand burned.