There are types of financial markets and its importance. Financial markets are a form of marketplace, by the name itself, that provides an avenue for the selling and purchase of assets such as bonds, stocks, foreign exchange and derivatives. In other words, they are “Wall Street” and “Capital Market”. But, basically, they all all mean one and the same thing. Simply put, companies and investors will go to the capital markets, respectively, to raise funds to expand their company and make funds.
Here are types of financial markets and its importance.
Types of Financial Markets
There are so many financial markets, and every country is home to at least one, although they vary in size.
1. Stock Market
The stock market exchanges public company owned securities. Each share comes with a price and when they perform well on the market, the investors make money with the stocks. Stocks are easy to buy. The real challenge is selecting the right stocks that will earn the investor capital.
2. Bond Market
The bond market gives businesses and the government incentives to raise funds to fund a project or investment. In a bond market , investors buy a company’s bonds, and the company returns the amount of the bonds within an agreed period plus interest.
3. Commodities Market
Commodity market is where traders and investors buy and sell natural resources or goods like corn, oil, meat, and gold. For these resources a particular market is generated because its price is unpredictable. There is a futures market for goods where currently the price of products to be shipped at a given future date is already defined and marked out.
4. Derivatives Market
Such a market entails derivatives or contracts whose value is based on the market value of the traded asset. An example of a derivative is the aforementioned futures in the commodities market.
Importance of Financial Markets
After you knew the kinds of financial markets, there are three most important financial markets. First, financial markets include a position which creditors and debtors are handled equally and appropriately, regardless of their size. Second, they provide individuals, companies, and government organizations wit access to capital. Third, owing to the many work prospects it provides, the financial markets help lower the unemployment rate.
