What is the financial market and how to apply the different types of investment!

The financial market is a great choice for those who want to invest and raise capital.

In addition to credibility, the financial market is analyzed by financial and government agencies so that no manipulation takes place.

Continue in this article and learn more about how the financial market works through the following topics:

• What is the Financial Market?
• Who works in the Financial Market?
• How does the financial market work? 
• Types of investment
• Track your investments! 

What is the Financial Market?

The Financial Market is the environment of the Financial System where transactions of purchase and sale of assets take place. Some of these assets are Real Estate Funds, shares and Government Bonds.

This Marketplace enables the connection between the members of the system and companies and public organizations that are offering these assets.

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Who works in the Financial Market?

The Financial Market encompasses several professionals who seek profit with their applications. Check out the top three below:

Autonomous Investment Agents

The Autonomous Investment Agents are professionals who already have a certification and an advanced qualification to work within this Marketplace.

Several of these agents evolved their functions with time and experience in the Financial System, even opening investment consulting companies.

Traders

Traders are professionals responsible for periodically monitoring the value of assets and profiting from it.

Their job is to buy a specific stock and take advantage of positive swings to sell it and thus make a profit.

Trades can be divided into:

• Day Trade - Leverage Operations of just 1 Day;
• Swing Trade - Leverage Operations up to 2 weeks;
• Position Trade - Medium Term Investments (Few months);
• Buy and Hold - Long Term Investments (Decades).

Investment Analysts

Investment Analysts are trained professionals focused on offering the best type of analysis and advice to investors within the Financial Market.

Now that you know who works in the Financial Market, let's understand how it works.

How does the financial market work? 

The Financial Market itself is fully concentrated within a few capital markets, the largest of which is the Stock Exchange.

The Stock Exchange was founded to connect companies and people and manage all aspects that involve this part of the Financial Market.

For its operation, analyzes are carried out by various bodies, such as the Securities and Exchange Commission. This evaluates each company that is integrated into the Stock Market, avoiding any manipulation.

This may be a physical location, such as the New York Stock Exchange (NYSE), or an electronic system such as NASDAQ.

Charles Dow, founder of Dow Jones and The Wall Street Journal, developed the Dow Theory, which addresses the movement of stock prices.

However, the secondary market is composed by bonds and mutual funds, in addition to modern cryptocurrencies. Check below how to choose the one that best suits your needs.

Types of investment

The types of investments are categorized into two large groups: fixed income and variable income.

The main differences between them concern the forecast of the return on the money invested, the liquidity and the risk of the financial investment.

Fixed income

Fixed income is characterized by the return you will have on the amount invested. This means that the types of investments in this group are less risky, ideal for short-term applications mainly.

It is divided into:

• Fixed Rate: Investments with a fixed rate of return.
• Post-fixed: Investments with a rate indexed to economic indices.

Variable income

Variable income is known for the types of investments without predictability of return. Its profitability is linked to both external factors, such as economics and politics, and the ability of assets to prosper, such as company revenue.

Despite the possibility of large fluctuations, this type of investment stands out for generating higher returns than fixed income, especially in the long term.

In most situations, the maxim of the greater the risk, the greater the return materializes. That's why it's very important to monitor your investments, with stock control spreadsheets, for example.

Investment Products 

Cash

Money is the easiest way to invest, however, it is also the one with the least return. Savings accounts and certificates of deposit (CD) are some of the examples.

The CD allows higher interest rates to profit. However, they have a determined period of time (between months and years), penalizing users who want to withdraw early.

Bonds

Bonds represent a loan made by an investor to a borrower, involving a corporation or government agency. The use of this capital results in an interest rate that results in a profit for the investor.

These rates are determined by the market and these bonds are usually traded when interest rates are high. They can be carried out in investment banks.

Mutual Funds

Several investors buy a security, managed by portfolio managers. Most mutual funds have a minimum investment of between $500 and $5,000, but there are some with no set amount.

Exchange-Traded Funds (ETFs)

ETFs work similarly to mutual funds, but their deadlines and swings happen daily - just like stocks.

Due to the ease of trading and wide coverage, ETFs are extremely popular with investors. However, its fluctuations can also be drastic.

Stocks

Stocks are the participation of investors in the success of a company by increasing fluctuations and dividends.

Holders of common shares may vote at shareholders' meetings. Holders of preferred shares have preference over common shareholders in the payment of dividends.

Central Banks defends the list of relevant and influential news on price movements.

Cryptocurrencies

Cryptocurrencies are a new investment option with large fluctuations, making it a risky investment. You can buy and sell on exchanges, in addition to using them in specific businesses.

Bitcoin, Litecoin, Dogecoin and Ethereum are the most famous cryptocurrencies.

Commodities

Commodities are markets related to tangible resources such as gold, silver, copper, wheat, corn, soybeans, cattle and oil. They can be acquired through stocks, mutual funds and ETFs.

They also fluctuate a lot due to sudden events, which can be the weather or even war conflicts.

Track your investments! 

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