Investments: A smart way to grow your funds
4 types of Financial Instruments you need to know:
1) Equity represents ownership of a company also known as stock or share. People that own or invest in a company often known as shareholder/stockholder. There many types of equity investment: Common share, Preferred shares, Stock options and convertible bonds. The investors usually expect a return of their investment in the form of dividend and capital gain.
2) Bond is a debt security issues by borrower to raise capital for their business. The bondholder will receive regular amount of coupon payment (interest) over a specified period of time and the face value on maturity date of the bond. Thus, it is a fixed income instrument.
3) Commodities have physical presence which is different from stocks and bonds which are financial assets that have no physical presence. It can be stored and holding it would incur storage and transportation cost. They are natural resources needed by most nations and regions. When commodities are traded on an exchange it comes with specification such as grades, quantity, maturity date and delivery location.
4) Foreign Exchange is the trading of one currency to another in the forex market. The market is the largest and most liquid financial market in the world. It is conducted without a central physical exchange and is traded over the counter (OTC). It consists of a global network where currencies are bought and sold 24 hours of business days.
As technology advance, many have also venture into algorithmic trading. This method of trading utilised computer programming to transact within specified trades, all in accordance to a predefined set of parameters.