The Financial Market

In the section "What is investing?" we mentioned few medium of investment such as stocks, bonds, mutual funds, ETFs, real estate and business venture. 

Think of the morning market. A market is a place where trade happens.

 

For example, fish market, people trade fish or any kind of seafood or fruit market... and so on. 


What is financial market - key investment type

Same goes with financial market. It is a broad term describing any marketplace where trading of securities including equities, bonds, currencies and derivatives occurs.. basically a market where people trade financial products. 

New York Stock Exchange, main financial market in the world located at the Wall Street 

A stock is a share of ownership of a company. Someone who owns a share of a company entitles to vote at shareholders' meetings and to receive dividends. Basically you have a claim on part of the corporation's assets and earnings.

Fancy to be part of Starbucks business, or maybe be one of the shareholder for Tesla Motors? 

You can buy their stocks which is traded in the Nasdaq! 

Growth value of your investment will be from, amongst others, the capital gain, and dividend payment. 

Stocks
Bonds

A bond is form of debt investment. This means, you (investor) provide loan to the issuer of the bond (typically corporate or governmental). The borrower borrows the funds for a defined period of time and pays you an interest rate.

 

Usually companies, municipalities, states and sovereign governments issue bonds to raise money and finance a variety of projects and activities. Owners of bonds are debtholders, or creditors, of the issuer.

 

Mutual Funds

Mutual funds is an investment vehicle, managed by professionals, where it consists of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Typically, mutual funds will declare bonus or dividends on yearly basis. 

Example: Unit Trust

ETFs

Exchange Traded Fund (ETF) has almost similar structure as Mutual Fund. However, it is a marketable security that tracks certain underlying and trades like a common stock on a stock exchange. 

 

Some notable ETF are USO (United States Oil Fund) which tracks oil prices, TLT (iShares 20+ Year Treasury Bond) which tracks 20 year US treasury bond and SPY (SPDR S&P 500 ETF Trust) which tracks the movement of S&P 500.  

REITs
Futures

Quoted from investopedia.com, Futures are financial contracts obligating the buyer to purchase an asset or the seller to sell an asset, such as a physical commodity or a financial instrument, at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on a futures exchange. Some futures contracts may call for physical delivery of the asset, while others are settled in cash.

People go into Futures for hedging or speculative purposes. 

Options

Purpose of Options is almost similar to Futures. You can buy or sell Options to hedge your underlying or for speculative purposes. 

An option is a contract to buy or sell a specific financial product known as the option's underlying instrument or underlying interest. For equity options, the underlying instrument is a stock, exchange traded fund (ETF) or similar product. The contract itself is very precise. It establishes a specific price, called the strike price, at which the contract may be exercised, or acted upon.

More details on options can be found in Options Section.

An example of bond issued by Australia. Back then, it was issued in this form.

Now, most transactions being done electronically. 

A REIT, or Real Estate Investment Trust, is a company that owns or finances income-producing real estate. Modeled after mutual funds, REITs provide investors of all types regular income streams, diversification and long-term capital appreciation.

 

REITs allow anyone to invest in portfolios of large-scale properties the same way they invest in other industries – through the purchase of stock.

In the same way shareholders benefit by owning stocks in other corporations, the stockholders of a REIT earn a share of the income produced through real estate investment – without actually having to go out and buy or finance property.

Most REITs are traded on major stock exchanges, but there are also public non-listed and private REITs. The two main types of REITs are Equity REITs and Mortgage REITs. Equity REITs generate income through the collection of rent on, and from sales of, the properties they own for the long-term. Mortgage REITs invest in mortgages or mortgage securities tied to commercial and/or residential properties.

-Reit.com

A list of REIT companies can be found here: https://www.reit.com/investor/explore