Financial market refers to a wide marketplace where trading of securities take place which include FOREX market, bond market, derivatives market and the stock market. Financial market plays a critical role to having a smooth operation of economies, particularly the more developed ones.
A Better View of the Financial Market
As mentioned, financial markets play a significant part in foreseeing the operation of capitalist economies which is done by resources allocation and also, by creating liquidity both for entrepreneurs and businesses. The markets make it easier among sellers and buyers to trade their financial holdings. Financial markets are creating security products that offer returns for those who’ve got excess funds or otherwise known as lenders or investors. These funds are then made available to those who are in need of more money, or simply the borrowers.
Then again, investors compare brokers before they get into financial market. These brokers are the one who will be managing their accounts and responsible to grow their money.
Different Types of Financial Markets
Basically, there are different kinds of financial markets that you may or may inform your broker to get into. We will be discussing some of them in the next lines:
OTC or Over-the-Counter Market is actually a decentralized market. In other words, it doesn’t have physical locations and all of the trading and other transactions are carried out electronically. Therefore, market participants are expected to trade their securities without the presence of a broker.
OTC markets are handling exchanges of stocks that are traded publicly and typically not listed in major stock exchanges.
Bond is a kind of security wherein investors loan money for set period of time at pre-established rate of interest.
You might think of bonds as a contract between the borrower and lender containing the specifics of the loan as well as its payments. Bonds are being issued by corporations and municipalities, sovereign governments and states to finance operations and projects.
In most cases, the money market is trading products that are highly liquid short-term maturity and also, characterized by high level of safety and low rate of interest. At wholesale level, the money market does involve big-volume trades between traders and institutions. At retail level on the other hand, it includes mutual funds that are bought by the individual investors.
Individuals may opt to invest in money market by means of buying municipal notes, US Treasury bills, short-term certificate of deposit or CDs and so forth.