Financial markets can be tricky to understand, but since it plays such an important role in most Western and developed worlds, it is imperative that you understand what they are. People can become very rich through them, or they can lose everything they have, including the shirt off your back.
It is not difficult to understand why financial markets to confuse people. There are two definitions that are quite different, although they sound similar.
Definition 1: the financial markets is an organization that participates in the trade, such as banks, stock exchanges, etc. ...
Definition 2:. Financial markets is an act of trade between buyers and sellers
See the difference? On the one hand, financial markets, the organization, while the other side of the financial markets is the kind of action. Both definitions revolve around the "Trading", which is an action performed by the buyers and sellers.
For example, you want to buy a house and ask for a loan from banke.Banka says: "Ok, here is the $ 250,000 you need right now, but you must promise to pay us a little money every month for several years, Finally, you will be paying us more than $ 250,000. "Congratulations, only stores. You have $ 250K in the bank, received a promise from you to pay more - later. Thus, the store and both were involved in the financial market.
Why do Financial Markets Exist?
Financial markets exist for many reasons, but the main reason for the example above. They exist so that people who need money (borrowers) can find people who have money and are willing to lend it to them (lenders). It is absolutely necessary in a free market economy where the money is equal sloboda.Više money you have, the freer you are, do and have what you want.
Thanks to the financial markets, people are able to support themselves and others. People can support their families by purchasing a $ 250,000 home for a fraction of the price. Usually, you only pay a small up-front fee and then a small monthly payment. Financial markets and enable people to support businesses and make some money yourself. Suppose you want to buy shares in the company. In fact you said, "Hey, I love my company and I think that will give you the money and use it to make even more money for your company Oh, and you'll give me my money back. Plus bonus, do not ? "It's a bonus" is usually called a dividend.
of the financial markets is like air for our economy. Without it, the economy would surely die.
Who are the lenders and buyers?
Simply put, lenders and customers can be people, companies or organizations. Whether you're a lender or buyer depending on their role in the "Trading" process.
If you are asking for money, you are a borrower. You can borrow money from banks, is not it? The company borrows money from you when you buy their stocks. Did you understand that? Government to borrow money from people by selling bonds. This is a promissory note from the Government.
If you are handing money out, expecting to get it back later, with extra - then you are the lender. This is an additional 'part is called interest. "Sure, I'll lend you $ 10 today if you give me $ 12 tomorrow." You are charged $ 2 worth of interest. When you purchase shares in a company - you were a creditor in this case. You are also the lender when you put money into a savings account or money market account at a bank. You do not have to put it there, but once you do, they use their money to try to earn more, and you are paid interest.
Financial markets do our developed world order. Now you have a strong grasp basic concepts. You probably know more than most people. Do not stop here, though, because the more you know, the more you earn.
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