Once you understand why you need to invest in the financial markets and how you can make your investments, you might be wondering which assets to choose. Whether to choose stocks or bonds, or maybe exchange-traded funds (ETF)? If you prefer shorter-term options, you can target currencies or raw materials such as gold, silver or oil.
The shares represent a stake in the ownership of a publicly traded company. The companies are issuing shares to stimulate investment in their business. The shares represent the right over the equity and assets of the designated company and are traded on official exchanges or over-the-counter markets (off-exchange trading).
There are two ways for potential earnings from shares. One is when investors buy shares of a particular company at a lower price and sell them higher, so they will generate profits. This is known as capital gains. For this purpose, investors are trying to identify fast growing companies whose shares are attractive to both traders and buyers.
The other way to earn from investing in shares is by paying dividends. When you buy shares of a company, you are entitled to a share of the profits generated by that company. This is known as a dividend that can provide a steady flow of income to investors.
The stock indices are also a popular investment opportunity. These indices track the presentation of certain groups of shares. NASDAQ 100 includes, for example, the shares of the 100 largest technology companies in the United States.
Exchange-traded funds (ETF)
One of the best investment opportunities in the financial markets is through stock-exchange traded funds or ETFs. Frequently, ETFs are index based and their results are based on the correlation with the indexes followed. These funds are a pool of shares belonging to a particular industry. The goal is to mimic the return on these shares, but at lower costs. The investors can buy or sell shares of these exchange-traded funds (ETF) in real-time in trading hours. In order to be successful in investing in ETFs, you must predict correctly the performance of a set of companies.
Of course, financial markets offer more investment opportunities, such as bonds, commodities and currencies, to quickly and easily diversify your portfolio and manage the risk.