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Financial markets: A comprehensive guide to mastery

As the name itself suggests, financial markets are the kind of marketplaces that serve as a platform for the purchase and sale of a variety of assets like foreign exchange, derivatives, stocks, bonds, etc. Financial markets are places where investors and businesses raise money from. 

Individuals maintain a savings bank account. The money deposited there is used by the bank to lend loans to either individuals or other organisations. They charge a percentage as an interest fee in turn. This way, the depositors also earn a benefit. There are many different kinds of financial markets that people should be aware of. Awareness about the financial markets is of the utmost importance as it allows you to take a call on the smartest way in which you can use your money. 

Different Kinds of Financial Markets 

There are different types of financial markets, some of which are discussed below: 

• Bond market: A bond market is a place where the government and the companies can secure money so that they can finance an investment or a project. In this market, the investors purchase bonds from a company on the condition that the company will return the bond amount along with interest within a given period of time.
• Stock market: This is a platform that trades the public companies’ shares of ownership. There is a price allotted for each share. The performance of the stocks in the market determines the amount of money that the investors will make. The catch here lies in choosing the best stock that will be able to reap the investor the most benefits. An investor can choose the right kind of stock by counting on a number of indicators that can help to assess the performance of the stock market.
• Commodities market: In this kind of market, investors and traders meet to sell and buy commodities like oil, corn, gold, meat, etc. and other natural resources. These items do not have a specific price, nor can the price be predicted. In a commodities futures market, the price of items to be delivered in the near future are identified and then sealed.
• Derivatives market:  Derivatives market is the kind of market that involves contracts or derivatives whose value depends on the market value of the commodity that is being traded.

Importance of These Financial Markets

There is no point in keeping your money tucked under your pillow. The value of money increases when it revolves around the market. Listed below are some of the functions of financial markets:

• These markets will help to invest your savings into something more fruitful: Financial markets do not let your money sit idle. Let us again take the example of a bank. When we deposit money in a bank, the bank then opens up the money to companies and individuals who are looking for loans and charges a rate of interest from them in return. 
• It helps to determine the price of the securities: Investors are likely to reap benefits from their securities. While the price of services and goods is determined by the ‘supply and demand’ law, it is the financial markets that determine the price of these securities.
• Financial markets help to turn the assets to liquid easily: Financial markets are a place where sellers and buyers can trade their securities whenever they want. They can make investments or sell securities as and when they want.

Financial markets are a great platform where the different kinds of participants like the debtors and investors, disregarding the size, are able to transact in a fair manner while receiving proper treatment. With the help of these financial markets, government organisations, companies and individuals can gain quick access to capital. Not only this, but financial markets also bring about many job offers and, therefore, help to lower the rate of unemployment.

 Conclusion 

In modern times, Financial Technology is a domain that uses the perfect amalgamation of technology and finance and allows smooth and seamless delivery of financial services with the help of new and innovative technology. The emergence of Financial Technology will alter the way in which brick-and-mortar structures are handling the business. If you opt for an MBA in Fintech training program, you will gain knowledge on a variety of innovative technologies such as Artificial Intelligence, Blockchain, the Internet of Things, Cloud Computing, and many more. All these technologies will help the students to acquire the skills and implement them so as to enable the efficient execution of tasks related to the financial services sector.

Once you learn Fintech, you will be able to understand the nitty-gritty details of financial markets and the latest related technology.  KL’s MBA in financial markets will equip you with all the knowledge that you will need to gain expertise in this domain. 

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Financial Markets: 5 Things You Might Not Know About Them

A financial market is one of the fascinating places for those who love to hear the jingle of money. Many people have tried to decrypt and unravel the way the stock market works, predict when it will crash or see an upsurge, and measure its volatility and unpredictability. That is why some of them have lost big time in the stock market. But, those who could understand the language of financial markets have ended up raking in the moolah. See Rakesh Jhunjhunwala and Warren Buffet. They predicted correctly and earned millions or rather billions.

So today, to pep up your mood, we will pen down some little-known or unknown facts about the financial markets.

5 things to know about the financial market

The Rule of 72 

It is one of the oldest investment rules, invented by Luca Pacioli way back in the 15th century. The inexperienced investors often inquired about the investment period for doubling the investment amount. And, little did they know that it can be easily calculated with the help of the Rule of 72. This rule will help you determine the period in which an investment can become double at a fixed yearly interest rate. The formula for the simple rule is also given here: T = 72/R, where T is the period and R is the interest rate.

Try it for yourself. Assume that your investment amount is ₹5,00,000 at an 8% rate of interest. Then, the period for doubling according to the Rule of 72 would be 72/8 = 9 years. So, it would take around nine years for this amount to become ₹10,00,000. It is not a precise formula, but it is good for small amounts and low-interest rates.

  Our very own BSE is the largest and the oldest stock exchange in Asia

There was a Gujarati businessman, Premchand Roychand, from Surat, who founded Bombay Stock Exchange (BSE) in 1875. Even though Mr Roychand earned most of his income from the stockbroking business, he was also touted as the Cotton King and the Bullion King. He also earned the moniker of the Big Bull long before Harshad Mehta. It was due to his single-handed efforts that BSE issued the first native shares in the country. A stock brokers association was also formed for the first time in India. 

BSE is the oldest exchange in Asia and the largest because 5000 companies are listed on it. Apart from BSE, there are 23 other stock exchanges in India.

One share of Berkshire Hathaway costs you ₹ 2 crore plus

Berkshire Hathaway Inc. is one of the biggest (probably third) US MNCs, with its headquarters in Nebraska. The public company earns the largest revenue globally, as it earns most of its profit from its holdings. The most popular companies that Berkshire Hathaway wholly or partially owns are Duracell, Kraft Heinz, Coca-Cola and Apple. Warren Buffett, the ace investor, is the chairman and another famous investor Charlie Munger serves as the vice-chairman of Berkshire Hathaway.

TCS and Reliance Industries have more market value than Karachi Stock Exchange 

This seems to be a shocking fact, but it is entirely true. Large Indian companies such as TCS (Tata Consultancy Services) and RIL (Reliance Industries Limited) individually have a market capitalisation of more than Karachi Stock Exchange (KSE), which was established on September 18, 1947.

Further, KSE has a total market capitalisation of $40 billion. It began with five companies and a market cap of $260,000. The market cap of TCS is over $12,000 trillion. RIL has a market cap of more than $17 trillion. This shows how economically powerful India is in the Asian region.

The joint market cap value of FAANG companies is around 25% 

S&P or Standard and Poor’s are one of the most popular index creators all around the world. As per its surveys, the largest tech companies in the world, i.e. Facebook, Amazon, Apple, Microsoft and Google, have a combined market cap of $6 trillion. This is the largest capital concentration in the world and also in history. It also shows how valuable tech and data are in today’s world.

If we talk about market caps only, then Netflix and the Mexican stock exchanges are almost equal in net worth. Also, Facebook’s market cap is around 1.5 times IBEX in Spain. So, if you want to invest, then go for global tech companies which are showing spectacular YoY returns.  

To sum up, if you are intrigued by the financial markets and how they operate, hopefully, these five pointers are a great starting place. However, an MBA in Fintech is a good point to start if you are planning a career. Here, you will get a chance to learn about the fundamentals of finance, which will help you decode the market better. In this regard, you can consider enrolling in MBA in Fintech from KL University in partnership with Imarticus Learning.