A financial market is a type of market which allows people to trade various securities at a low transaction cost. These securities may include shares, bonds, precious metals or currencies. Most people are conversant with the regular commodities market, where one needs to physically open an account with a broker. However, nowadays it’s possible to trade securities online, whereby the investor needs to register an online account, and they can trade by themselves without having to involve a broker, thus helping you save on the commission costs that are charged by some agents.
Common Types of Financial Markets
Though financial markets are regulated on an individual country level, there is some interconnection between governments and international organisations which regulate the operations of the markets. Here we have explained some of the internationally recognised types of financial markets.
- Stock Markets
The stock market is where large companies and corporations go to raise money for expansion or running the business. Stocks are shares of a company sold through stockbrokers to investors, who in turn have an ownership right to the business, depending on the number of shares one owns. Investors make money when the company makes profits and the return is shared among the investors.
- Bond Market
Bonds are long-term loans to companies or governments which have a more extended maturity period depending on the type of bond. Once this time elapses, the investors get back the money they had loaned out, plus the interest accumulated during this period. Some of the common types of bonds include corporate, treasury and municipal bonds.
- Forex Trading
The forex trading market is a global market place where currencies are traded, and it is an essential aspect to allow international trade to take place. To avoid the volatility of this market, banks take up almost one-fourth of all forex exchange transactions, and the prices are determined by demand and supply forces.