7 Types of Financial Markets

Many people love the idea of having investments and wise investments at that. However, it is not that easy to figure out what and where to invest in. Knowing and understanding the different types of financial markets will help you choose the best place to put your hard-earned money.

1. Capital Markets

Capital markets are technically any markets involving capital movement from one entity to another, often with those that have capital offering it to others who also need capital for some value in return. Good examples of bond markets and stock markets of capital markets. These markets are better poised to provide support for long-term building of wealth in a diversified portfolio.

2. Commodity Markets

These markets involve selling and buying of primary products like raw materials. Gold, oil, and beef are a few examples of tradable commodities. Commodity markets trade on current value, with some commodities performing in stable manner while others historical trend contrary to capital markets. This makes commodities an excellent addition to portfolios that also include other forms of investments.

3. Derivatives Markets

Derivative market assets are founded on something else. For instance, you can buy gold derivatives. When you do so, it doesn’t mean that you own gold. This only means that the investment you own is tied to gold’s value. Once the value of gold goes up, your investment can potentially make you earn money.

4. Foreign Exchange Markets

Foreign exchange market, or simply forex, is a currency-related market. Forex determines the currencies’ exchange rate. Investing in this market is a good decision because of the fluctuating currency exchange rates that are rarely 1:1. When investing in the foreign exchange market, you do this in pairs.

5. Futures Markets

Having an investment in the futures market means you are placing your investment in a commodity or an asset in the future. However, the price that you agree on is its current price today. The investor’s goal here is to agree to the price that will leave you with future profits. Future markets tend to be complicated and often unstable since the value of commodities could quickly take turns due to different factors.

6. Insurance Markets

The insurance markets are exactly as their name implies. These are markets where you can invest in insurance or buy insurance products. It includes annuities or the insurance products paying out a future amount that has been agreed upon.

7. Money Markets

Money markets came to existence right from the time that money was used as a commodity. By investing in money markets, you are actually investing in the currency’s value or in a chance of debts being paid back with the right amount of interest. Investments in money markets are often regarded as short-term, with risks dependent on the specific type of investment you are making.

These different types of financial markets are crucial as they offer a common regulated space where businesses and people can trade and invest. You don’t need to invest in all of these markets. Choose the ones that best suit you to see great returns in the future.