A lot of people are barely aware of all of the trading that goes on in financial markets across the world. They have no clue how much money is being made by people who do nothing but buy and sell online all day long. This is meant to be a brief guide to better understand the different kinds of markets that are currently being utilized by financial traders across the world.
The stock market
This is probably the most famous and well known financial market. The stock market is where people are trading ownership in a company. Let’s take Apple for example. To buy stock in Apple is to literally become an owner in Apple. This means if Apple’s value goes up then the worth of your shares of Apple stock will also go up. If Apple goes down, you as a partial owner, will also lose value.
At its core, people that trade stocks buy shares hoping that the price of a company will be worth more in the future due to the company’s success. Then they will be able to sell those shares they purchased for a higher price, and pocket the difference. There are all kinds of ways to trade, but at its core that is what is going on.
Forex is the trading of money essentially. If you have ever been on a trip out of your current country and have exchanged money in your country’s currency for money in another country’s currency, you made a mini forex exchange. You may have noticed while on your vacation that the exchange rate varied slightly throughout the vacation.
Forex traders mainly use what is called Mt5 forex brokers to take advantage of these tiny exchange rate differences. They buy a significant amount of one country’s currency at one exchange rate, and then when the exchange rate changes, they pocket the difference. Forex traders typically need a good amount of money to get started and they make hundreds of trades in a day, making a little bit each time.
People that trade bonds are essentially trading debt. A company or a government can issue bonds. Essentially they are taking a loan out, but instead of getting that money from a bank or a creditor, they issue bonds. This gives everyday investors the ability to participate in that loan. An investor can buy $10 in bonds and then the issuing party owes them that $10, plus whatever incentives they have added to make it worth the investment. It could be interest, it could be steady payments for a few years followed by a repayment of the entire sum, or any number of things.
Bonds tend to be a much less risky form of investment because a bond is a debt that typically must be payed back. Because it is less risky, it is also less likely that an investor will “strike big” while dealing with bonds. Typically people will buy bonds as they get closer to retirement because they want their money in less risky places.
Another way investors make a solid income is through real estate. There are many ways real estate investors make money, and this could be its own section. Real estate investors essentially buy and hold real estate until it increases in value, they buy real estate and rent it out to bring in cash flow, or they buy and quickly sell at a higher price to pocket the difference.
Many investors are successfully using all of these methods to retire, or even live. All have their place, and there is a way to successfully make money using each one. Typically everyone has a specialty and starts with one thing.
How do you make your side or passive income?