Compare the Markets to Find the One That Works for You
To achieve any real success in investing, it’s important to compare the markets to find the best options for your particular needs and investment pattern. As any regular investor knows, there are several financial markets to choose from, each with their particular benefits and disadvantages. If you’re new to the markets, it’s important to familiarize yourself with the options available to you.
More than one market
When you begin to compare the markets, you’ll find that there’s more than the common stock market, which is the one with which most beginning investors are probably most familiar. The common stock market allows you to purchase shares in a company, basically giving you part-ownership (although your “voice” in the company may be limited to the occasional shareholder vote). If the company grows and increases its earning, the value of your stock in the company rises. If the company does not do well, the value of your stock falls. Achieving success in the common stock market involves knowing when to buy the stock, when to hold onto the stock and when to sell.
Bonds are certificates issued by a company or the government that you can purchase and are essentially a loan from you to the entity. They earn interest for each year that you own the bond and are paid back at the end of the agreed upon period of time. Bonds are bought and sold on the stock market and can rise and fall in value, but the interest rate will remain the same. In addition to corporate and government bonds (also known as gilts), there are also bond funds, which are a collection of bonds from various sources.
Preferred stock is a type of investment that is a combination of a bond and a stock. This is a top-level stock that allows the holder to receive the profits of a company before they are distributed to the holders of the company’s common stock. While holders of preferred stocks can access the company’s assets should the firm declare bankruptcy, the company can also buy the stock back and cease issuing dividends.
Finally, cash itself can also be an investment option in the form of money market accounts, mutual funds, certificates of deposit and interest-earning accounts. These types of investments pose smaller risks than stocks or bonds and can grow consistently over a long period of time. They are good for the cautious investor.
Explore these options and more when you compare the markets and select the right investment opportunity for your financial needs.
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