What types of financial instruments are traded in the financial markets?
Curious about financial markets
There are various types of financial instruments traded in the financial markets in India. Some of the commonly traded financial instruments include:
1. Stocks: Stocks, also known as shares, represent a small portion of ownership in a company. They are traded in the stock market and their price is determined by supply and demand.
2. Bonds: Bonds are debt securities that represent a loan made by an investor to a borrower, typically a company or government. They have a fixed interest rate and a maturity date, at which point the principal is repaid to the investor.
3. Mutual Funds: A mutual fund is an investment vehicle that pools money from multiple investors and invests in a portfolio of assets such as stocks, bonds or other securities. Mutual funds are managed by professionals and offer diversification to investors.
4. Exchange Traded Funds (ETFs): ETFs are similar to mutual funds in that they hold a portfolio of assets. However, they are traded on stock exchanges like individual stocks, and their price is determined by supply and demand.
5. Derivatives: Derivatives are financial contracts that derive their value from an underlying asset, such as stocks, bonds or commodities. Examples of derivatives include futures, options and swaps.
6. Commodities: Commodities are raw materials or primary agricultural products that are traded on commodity exchanges. Examples of commodities include gold, silver, oil, and agricultural products such as wheat and corn.
These are just some examples of financial instruments that are traded in the financial markets. There are many other types of instruments as well, each with its own unique characteristics and risks.