Lesson 1: What Are Financial Markets?

What Is a Financial Market?

A financial market is a platform—physical or digital—where buyers and sellers trade financial assets such as stocks, bonds, currencies, and commodities. These markets ensure liquidity, price discovery, and efficient allocation of capital.

Why Financial Markets Exist

Financial markets serve several critical purposes:

• Enable companies to raise funds for growth

• Allow investors to earn returns on capital

• Help governments finance public projects

• Facilitate price discovery through supply and demand

• Improve economic efficiency

Investing vs Trading

• Investing focuses on long-term growth and wealth building

• Trading focuses on short-term price movements and market timing

Both rely on financial markets but differ in strategy, risk, and time horizon.

Key Takeaway

Financial markets connect savers with borrowers and play a vital role in economic development worldwide.