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Financial Markets

Boosting the Economy

What exactly is a financial market? Confusion abounds, and for plenty of reasons. References to financial markets include a variety of perfunctory referrals, to include Wall Street, capital markets, or just the “markets”. The media often refers to them as “the stock market”, although the term intends to capsulate Financial Markets Stocks Bondscommodity markets and the bond market in addition to stocks. To simplify matters, we will define financial markets as financial transactions design to aid the growth and development of business, while returning investors a profit. This article will provide a brief synopsis of what is out there.

A stock refers to owning a part of a corporation made public through offering of shares, in turn traded to capitalists to affording companies the ability to raise funds to further development and growth. The capitalists (referred to as investors) gain profitability through the growth of those corporations, thereby driving the economy. Rocket science is not a requirement to purchase stocks. On the other hand, understanding the right company to purchase them from to engender such profits, will involve due diligence. Much of the general public correlates, the Dow Jones Industrial Average as the

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stock market. Yet, Dow Jones is only a portion of such financial markets. Stocks comprising the various averages are the bought and sold through international market exchanges, such NASDAQ exchange. Mutual funds on the other hand afford investors the option of purchasing small parts of a large number of organizations, allow for specified allocations and the spreading of risk. By cutting stock market unpredictability, world economies remain steady. Notwithstanding such gains, investors much learn to choose a proficient mutual fund.

In addition to the stock market, you also have the bond market. Broadly speaking, as stocks increase in value, the price of bonds will decrease. The financial market offers a diverse range of bonds for sales. One such type refers to Treasury Bonds. Others are municipal bonds and corporate bonds. Bonds also furnish fluidity that greases the global economy; often directly influence the interest rates of mortgages.

The commodities market makes up another part of the financial market. The economy of the United States relies in part, on a commodity known as oil. The futures market determines the price of oil. Futures refers to the ability to remit payment for a commodity today but is delivered in the future, aiding in the reduction of unpredictability concerning the economy. Still, futures also heighten the investors’ advantage by granting him ability to borrow the currency to buy a commodity. If the investor assumes the wrong trade, negative impacts snarl the economy.

Listing of the Various Financial Markets

  • 1. Capital Markets: Made up by the Stock markets and Bond markets

  • 2. Commodity Markets: Trade of products that occur naturally or grown as crops.

  • 3. Money Markets: Assets that are traded for short-term borrowing and lending
    Financial Markets Indexes, commodities, futures

  • 4. Derivatives Markets: Financial instruments such as futures contracts or options that are based on other types of assets.

  • 5. Futures Markets: Consist of contracts to buy or sell a specific commodity at a certain date in the future at a given price.

  • 6. Insurance Markets: Transfer of the risk of a loss in exchange for a premium

  • 7. Foreign Exchange Markets: Worldwide decentralized financial market dedicated to the trading of various currencies.