Various items are traded in the stock market. Such include bonds, stocks and commodities.
These securities can be traded and obtained for either short or long terms. Either security can be acquired by different bodies such as government or companies or even individuals and mutual funds.
- What are stocks?
Stocks can be defined as a share of ownership in a corporation. It is also considered as shares, equities or capital stock. These shares can either be bought or sold in a centralized market called the stock market, in order to raise money, support business activities and investments. There are different factors in determining stock share prices. Most investors evaluate prices by means of the P/E ratio or price-to-earnings ratio. These calculations are essential in the sense that they determine the effectiveness of the company’s business operation against the over-all stock market.
- What are bonds?
Bonds are interest-bearing notes or certificates issued by governments and companies. Bonds are acquired by an investor for an agreement of interest in return. Basically, the one who purchases the bond is loaning money. Bonds have to be repaid on its maturity date. Maturities are classified into three: the short(less than one year), the medium (ranges from 1-10 years) and long (exceeding 10 years). Treasuries or government bonds are considered as the most secure venture.
- What are commodities?
Commodities are essentially material goods that can be bought or sold in the stock market. Common commodities are comprised of metals, agricultural merchandise and industrial utilities such as oil and gas. These commodities are traded under special exchanges and are treated very well specially those on utilities like petroleum and gas.
Owning, Pricing and Trading
Bonds, stocks and commodities can be traded and acquired by investors. However, each has a different means of acquisition. Stocks are held in portfolios and owned over periods of time. Some companies allow stockholders to share profits in the company. Such is called a dividend.
Bonds can also be traded. But these are to be held for long investment terms and must be paid with a fixed amount yearly. Usually, bonds have $1,000 face value, representing the amount to be repaid at maturity date.
Among the three, commodity prices are the most unstable. These products rely heavily on supply and demand. Natural calamities, agricultural problems, economical and political instability and the like affect the prices. Every commodity is priced distinctively. Each has a “spot” and “future” price. Spot prices represent prices as if it were supplied at the moment, whereas future price are market expectations basing on various outside factors.
Hazards and benefits
Bonds, stocks and commodities provide investors with both hazards and benefits. Usually, short-term investments are more prone to jeopardy but at the same time, higher revenues. Long term ventures, on the other hand, offer more steady revenues and lower risk rates. Economic experts and analysts have come to an agreement that combining these three ventures can lead to a more successful investment.
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