Investing: Part C – Beyond The Basics of the Stock and Bond Markets

The Many Ways to Earn Money
AKA “Multiple Streams of Income”
The Mini-Series

Investing – Part C: Beyond The Basics of the Stock and Bond Markets

“What else you can do with your money in the Stock and Bond Markets!”

Stock Market: Wikipedia defines a stock market as a public market for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.

Bond Market: Wikipedia defines the bond market (also known as the debt, credit, or fixed income market) as a financial market where participants buy and sell debt securities, usually in the form of bonds.

Mutual Fund: Wikipedia defines a mutual fund as a professionally managed type of collective investment scheme that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities. The mutual fund will have a fund manager that trades the pooled money on a regular basis. The net proceeds or losses are then typically distributed to the investors annually.

You must have a larger amount of discretionary income, a larger appetite for risk, and a lot more knowledge to use your money in these areas.

More Discretionary Income:

You will need a much larger number of investment dollars for you to have a chance to make money in these areas.

More Risk:

These areas are usually controlled by forces larger than us. Thus we are not in control as much as the basic investments.

More Knowledge:

There are experts in these fields of investing. My strong recommendation is: USE THEM

IF you can afford it, if you can manage the risk, and if you use the experts effectively – you can increase your wealth greatly using these highly specialized investments.

As you can probably surmise, these areas will be defined but, not in depth because of the amount of knowledge required to properly guide you through the intricacies of each area.

Financial market – Commercial paper, treasury bills, bank notes and paper that can be bought at a low rate and sold at a higher rate. These can be unsecured or secured by the issuing bank or the U.S. Treasury. A Financial Market can also be very general, a place to go to invest in almost everything.

Foreign exchange market – Other country’s currency or government investment instruments are bought and sold on a regular basis. So you think the Peso will be increasing in value; you could buy it now and sell it when it increases in value. The purpose of the foreign exchange market is to help international trade and investment.

Derivatives market – If you have heard of a “hedge fund”, it is part of the derivatives market. Rather than trade or exchange the underlying asset itself, derivative traders enter into an agreement to exchange cash or assets over time based on the underlying asset. A simple example is a futures contract: an agreement to exchange the underlying asset at a future date.

Commodity market – This is a more common market, but highly risky. This market is set up so you can buy and sell raw or primary products such as, gold, diamonds, coffee, pork bellies, etc. There are several Boards of Trade you can go to if you are so inclined to invest in commodities. Commodities are often traded with a futures contract.

Spot market – This is also called a Cash Market and it is either a commodity or security that is sold for cash and delivered immediately.

OTC market – OTC means Over-The-Counter and means just that. OTC trading is to trade financial instruments such as stocks, bonds, commodities or derivatives directly between two parties. No stock exchange is involved. You will most likely use an investment bank to do the paper work on these trades.

Annuity market – This is actually not difficult to understand. You will have to use a qualified insurance company. A contract is created when you give the life insurance company money which may grow on a tax-deferred basis and then can be distributed back to the owner in several ways. The defining characteristic of all annuity contracts is the option for a guaranteed distribution of income until the death of the person or persons named in the contract. There are annuities that have the guaranteed-income-for-life feature.

Index market – An index is a group of stocks in one area of interest, such as rental property companies or bio-tech companies. The index is a measurement of that sector. The most notable is the Dow Jones Index. You can invest in the Index Market as you invest it normal stocks. Is very similar to what mutual funds do.

Web-Sites to Assist You

You may have missed these other posts in our Many Ways to Make Money series:

The Next in the Series: Real Estate Property: Part A

Gary

About Gary

I am retired, but not tired. I still want to be valuable to others. I know that others are valuable to me. After looking back on six decades, I have asked myself this question: “What do I believe?” My mind filled up. My heart started beating faster. My spirit soared. I post blogs to share what my mind is working on, what my heart believes would help others and, what my spirit is communicating to me. What do I believe, you ask? Decisions dictate your path In love, not hate In tolerance, not prejudice In health, not sickness In wealth, not poverty In kindness, rudeness In happiness, not sadness In encouragement, not discouragement In faith, not doubt In courage, not fear I have been and will be challenged in each one of these beliefs, but the biggest belief is to stay positive and not turn negative. This belief helps me maintain all of the others.

2 comments to Investing: Part C – Beyond The Basics of the Stock and Bond Markets

  • Choosing whether you take your pension as a lump sum or as an annuity is an extremely important, irrevocable decision that I feel should be made with input from a financial advisor and tax professional.

  • Excellent! If I could write like this I would be well happpy. The more I see articles of such quality as this (which is rare), the more I think there might be a future for the Net. Keep it up, as it were.

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