Lesson 2: Types of Financial Markets

Lesson Overview

Financial markets are divided into different categories based on the assets traded. Each market serves a unique purpose and attracts different types of participants.

Stock Market

The stock market allows investors to buy and sell shares of publicly listed companies.

• Represents ownership in a company

• Returns come from price appreciation and dividends

• Examples: NYSE, NASDAQ, LSE

Bond Market

The bond market involves trading debt instruments issued by governments and corporations.

• Investors lend money in exchange for interest

• Lower risk compared to stocks

• Used for income generation and capital preservation

Forex (Foreign Exchange) Market

The forex market is where currencies are traded.

• Largest and most liquid market in the world

• Trades currency pairs (e.g., EUR/USD)

• Influenced by interest rates and economic data

Commodity Market

Commodities include physical goods such as:

• Gold, silver

• Oil and natural gas

• Agricultural products

Used for diversification and inflation protection.

Derivative & Digital Asset Markets

• Derivatives: Futures, options, swaps

• Cryptocurrencies: Bitcoin, Ethereum, digital assets

These markets are more complex and often carry higher risk.

Key Takeaway

Each market offers unique opportunities and risks, making diversification essential.