The world’s largest financial market is the stock market, where stocks and other securities are bought, sold, and traded. The stock market generally offers investors higher returns than risk-averse investment vehicles (such as savings accounts) because the risks are more significant. There is a high chance that you will get a profit in a year or two, but you will face a more substantial loss in case of a recession. So one must be aware of the risks involved before investing. To become a successful investor, one needs to be financially literate to make correct decisions regarding buying and selling stocks at appropriate times, resulting in higher capital gains.
Types of Stock Market
1. Traditional market
A New York Stock Exchange (NYSE) is a United States stock exchange located in New York City. It is the oldest exchange in the U.S., founded by New York stockbrokers in 1817. It is one of the largest stock exchanges in the world by the total value of its listed companies. The NYSE deals in a wide range of equities and derivatives but is best known for its equity indices, such as the Dow Jones Industrial Average (DJIA), S&P 500, NASDAQ Composite, and Russell 1000. At least three official U.S. stock exchanges exist, including the New York Stock Exchange and NASDAQ.
2. Electronic market
The London Stock Exchange (LSE) is a stock exchange located at Paternoster Square, close to St Paul’s Cathedral in the City of London. The LSE was founded in 1801 and is the world’s oldest stock exchange, and today it remains one of Europe’s largest bourses. The business has over 23,000 companies on its books, representing over 7 trillion euros in market capitalization. Its MSCI AC World Index is one of the most widely used benchmarks for global equity performance and funds management.
3. Alternative market
A crash is a sudden fall in prices below the level that would have been expected beforehand, usually triggered by news of bad news. A collision can be caused by trader speculation (an overbought situation) or by rational speculators who have concluded that the price is about to correct once and for all (a bear market). In economics, a crash is also referred to as a bubble burst, stock market crash, or stock market correction.
4. Asset Market
An asset is any item of value belonging to someone who can take action to benefit from owning it. Many types of investments are owned by individuals and governments, inter-government organizations, and international bodies.
A currency is a medium of exchange accepted by the general population to pay for goods and services. A fiat currency is established as money by government regulation or law. Governments generally regulate the amount of money in circulation (by a central bank) and impose controls on its use to combat inflation or deflation, avoid financial crises, reduce the risk of bank runs or limit adverse effects on their respective economies. Asset markets are sub-sectors of financial markets that deal with a wide range of assets, as opposed to financial instruments, such as debt securities. Most asset markets focus on pricing investments in specific classes of assets. These can include real estate, private equity funds, and bonds.
5. Commodity market
A commodity is an economic good produced, bought, and sold on a large scale. Some examples of items include gold, oil, and gasoline (crude oil), wheat, corn, and coffee beans (raw/processed), pork bellies and soybeans (commodities), cotton (artificial fiber), or frozen orange juice concentrate (entities). An asset class is a group of assets that share a common attribute like risk profile, return potential, or liquidity. In finance, the term is commonly used for broad asset classes such as equities and fixed income but also encompasses more focused segments like private equity.
6. Exchange Market
An exchange market is a market in which securities, commodities, derivatives, and other financial instruments are traded through brokers and dealers. The two main exchange markets are stock exchanges, which trade equity securities, and futures exchanges, which trade derivative contracts on physical commodities such as agricultural products or crude oil. These two markets can be combined in one overall classification called financial markets.
7. Currency Market
A foreign exchange market is a financial market that allows firms, individuals, and governments to purchase or sell a particular currency at a specific price. These currencies have different values from each other. The foreign exchange market is a forex, F.X., or currency market. F.X. is the largest financial market in the world.
Currency refers to money in any form when in use or circulation as a medium of exchange, especially circulating banknotes and coins. Currency is historically the most common money used for payments and contracts between businesses and individuals.
8. Commodity Futures Market
Commodity futures are derivative contract that gives the holder the right to buy or sell a commodity at an agreed-upon price at a future date.
Commodities are natural raw materials and agricultural products, although some commodities, such as fossil fuels, also represent a form of the energy commodity. They have traditionally been essential to investments, especially during financial uncertainty or economic slowdown. Many commodity markets have evolved, trading them on different exchanges and working towards standardization.
9. Financial Futures Market
A financial future is a standardized forward contract traded on a futures exchange based on a particular asset, such as an equity index or interest rate. Futures markets allow trading in the underlying assets at a predetermined future time and price. A futures contract is standardized for the quality and quantity of the underlying asset.
The term “futures” is from the old word “future” since, in this type of contract, delivery and payment are both scheduled in the future.
Finance is the process of producing, transferring, exchanging, holding, and using money or financial assets. It involves our economics, accounting, and finance theory classes. From the lecturer’s perspective, the primary objective of a syllabus for economics is to prepare students for their undergraduate program (e.g., at universities in Australia and New Zealand) and for employment or further study in either academia or industry. There are many things you need to know about economics and finance. This page will help you to find the list of essential finance topics in detail, with easy-to-understand examples and info graphics.