Investing in the markets is a favourite pastime for many people around the world. You can really have a great time understanding how the markets work and figuring out how and when to place your money to gain great returns.
But there are many who would like to participate in the markets but do not have an understanding of the different investment options. For those and others who would like to learn here is a breakdown of stocks, bonds and derivatives.
Stocks are purchased equity in public companies. Purchasing them gives you the opportunity to own a piece of equity in the world’s most influential and recognized companies and smaller ones that have great potential as well. You can purchase stocks as individual equities if you have experience in picking the right ones, or pick a mutual fund that aggregates a variety of stocks from a particular business sector or company size, in an effort to spread risk. Investors tend to take either a strategy of either picking hot stocks and holding on to them for a short term fast profit, or picking great companies and holding on to their stocks for a long period and take advantage of long term growth. Each strategy has its own levels of risk and investors must really understand the ins and outs of their investment strategies in order to be successful. In either case, purchasing stocks gives you the opportunity to own a piece of Apple, Google, Walmart, GE or Facebook.
Because of their safety, bonds are the preferred purchase of large institutions, sovereign funds and foreign governments. Bonds are debt taken against a government or public corporation and depending upon the good standing of the entity presenting the bonds, the risk to the purchaser or investor might be near to zero. Bonds are large purchases typically and as a result, individual investors typically buy through a broker who is able to offer them in ways that smaller investors can participate. Bonds offer minimal risk and a guaranteed return, but the returns are low. The goal with bonds is to have an investment whose return is guaranteed over time.
Derivatives are financial contracts that get their value from an underlying asset. It can be stocks, commodities, or currencies.
Options are a type of derivative that give investors an opportunity to make money from the success or decline of the underlying asset base. Traders leverage the asset for a fraction of the price. They can be complicated to understand and there are several different classes including the least complicated called binary options that are much easier to understand and can be purchased and sold using software on binary option trading websites When you go to a site like Binary.com review the data about how the industry works and discover more about how people make lots of money in the binary options markets. You can also review the risks associated with trading.