What financial instruments are traded in stock markets?

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The stock market is not restricted to shares, these instruments give a sizeable return too. Investors invest their money in the stock market to make their corpus. Some investors invest money for the long term and some for the short term. Generally, people believe that only shares are traded in the stock market, but it is not so. Apart from shares, there are many other financial instruments, which are traded in the stock market. In this article, we will talk about them.

Shares

Shares are the most popular financial product of the stock exchange. When you buy shares of a company, you are actually taking a partial stake in that company and becoming a shareholder of the company. Share prices fluctuate every moment. Profits and losses are determined by this fluctuation.

Derivatives

A derivative is a contract between two parties. In derivatives, the investor contracts to buy or sell an asset on a specific day and at a specific rate. This asset can include shares, currencies, commodities, etc. Derivatives are also used for gold and oil. There are basically four types of derivatives – futures (futures trading), options, forwards, and swaps. To know more about derivatives trade go to 5paisa.com https://bit.ly/3RreGqOwhere you will find multiple product offerings for derivative trading.

Mutual fund

Mutual funds invest money in various assets such as equities, money markets, bonds, and other financial instruments by raising money from multiple investors. In this, your portfolio is managed by the fund manager, whose job is to provide high returns to the investors. Mutual funds can be a good option for new investors and those who have little knowledge of the stock market.

Bonds

The government or companies issue bonds to raise money. In fact, by buying a bond, you are in a way lending to the issuer. The issuer pays you interest for this loan. Bonds are considered a safe investment option as they offer a fixed rate of interest to the investors. Bonds are also called fixed income securities because of their fixed income.

Currency

Currencies are bought and sold in the currency market i.e., forex market. Currency trading involves banks, companies, central banks (such as RBI in India), investment management firms, brokers, and general investors. In currency trading, transactions always happen in pairs. For example, USD/INR rate means how many rupees it will take to buy one US dollar. You can trade currency through exchanges like BSE, NSE, or MCX-SX.

Commodity

Commodities include trading in everyday items like agricultural products, energy, and metals. The best way to invest in commodities is through futures contracts. These are contracts that facilitate the purchase or sale of goods at a specified price at some future date. Trading in commodities is riskier for inexperienced investors. Trading can be done through other exchanges including Multi Commodity Exchange, National Commodity, and Derivatives Exchange.