There’s no doubt that technology has revolutionised the world’s financial markets, both in terms of the range of assets available and the unique trading instruments that can be used.
As a result of this, we’ve seen the lines between separate markets become blurred in recent times, meaning that it’s now possible to invest in commodities such as gold through futures contracts and exchange traded funds (as well as assuming physical ownership of this asset class).
Whilst this has created significant opportunity for investors, it has also made it harder for newcomers to identify viable products and build their individual portfolios. In this post, we’ll take a look at some of the different trading products and ask which one’s right for you.
- Currency and the Forex Market
We start with the largest and most liquid financial market in the world, and one that facilitates the exchange of one currency for another in a selected pairing.
Whilst only a select few of the major currency pairings are truly liquid, they’re traded as derivatives and this means that investors can profit without assuming ownership of the underlying financial instrument.
This creates an opportunity to make money even as the value of a specific currency depreciates, and in this respect the forex market is tailor-made for speculative investors who are in search of short-term gains.
- The Stock Market
Whilst this market lacks the liquidity of the foreign exchange, it’s also decidedly less volatile and offers a more secure store of wealth to investors.
In simple terms, the market allows for the buying and selling in shares of a company, with the value of this stock dependent on various economic and commercial factors.
In most instances, investors assume direct ownership of the stock in question, as they look to profit from either short-term price movements or drive long-term and incremental gains (through blue-chip stocks such as Coca-Cola).
- The Options Market
In this market, participants are allowed to undertake positions in the derivative of an asset class, including those that are typically traded physically (such as stocks and gold).
Once again, traders can operate freely in this market as they’re not required to assume ownership of the underlying financial instrument.
Instead, they speculate on the option price associated with the asset in question, and whether this is likely to increase or decrease within a set period of time.
- The ETF Market
Last on our list is the ETF market, which also represents a number of different markets and assets (with currencies and commodities arguably the most popular.
Typically available through online brokerage platforms such as ATFX, these funds bring various assets together and work in a similar way to stocks.
More specifically, they can be bought and sold either rapidly or in the long-term, depending on your individual outlook and philosophy as an investor.