Before you start trading, it is important that you know that there are multiple types of assets . Assets are groupings of securities with similar properties, that are actively traded in the current market. The four most used asset classes to invest are: stocks, fixed income, money markets and alternative investments. In this post, we will discuss each of the basic properties of these assets, how to profit from trading them, and the risks associated with doing so.
The most used assets in Trading are the following:
– The actions
– Fixed income
– Money markets
– Alternative investments
One of the most used assets are the actions . When a company goes public, the shares of ownership are bought and sold on open market stock exchanges like the NASDAQ or NYSE.
They are the most actively traded security type of the equity asset class, followed by mutual funds, which are a diversified basket of fractional shares of those common stocks. The most common risk is that a company’s share price may drop below what it was bought for, resulting in lost profits. Stocks are the most volatile securities, especially when held short-term. fixed income securities are commonly known as “bonds”, are another of the most common assets. A bond is basically a company’s debt to you, as the buyer. It is a promise that in ‘x’ years, until maturity, you will receive a fixed amount of income based on the interest rate of the bond, as well as the return of the principal amount. Although fixed income is considered one of the safest trading instruments, there are risks. The value of a bond exists in direct response to inflation, as well as rising or falling interest rates. The other risk factors are credit and liquidity.
Liquidity risk is associated with the market demand for the security.
Another of the main assets are the money markets . These are used for investing due to their high liquidity and security. They are generally short-term and benefit from more competitive interest rates than bank savings accounts. Its liquidity makes it easy to convert your investment into cash and, at the same time, obtain a low level of profitability. Despite its safety, the risk of inflation remains a factor as it can outweigh low yields, reducing purchasing power.
The fourth main asset in trading is alternative or tangible investments . These assets make up the largest volume of the four asset classes listed. They are represented by physical assets intended to protect investors against inflation. The most common is real estate, which when bought, sold or rented, counts as an investment.
Some of the risks of real assets are fluctuations in property value, expenses, ongoing income, and environmental liabilities. Liquidity can also be a risk when the investor wants to sell if there is little demand in the market.
With the right course and the right trading platform, anyone can learn to master the financial markets and achieve financial freedom.