3 Different Types of Trading

Do you currently dabble in investments? If you do, congratulations! You’re one of the few. While I think that investing is actually kind of fun (and you might too), many people consider it an absolute yawner. It doesn’t have to be though. After all, my friend recently updated her investment portfolio to hopefully earn some more money and her fund went from $12,000 to $15,000 in just 3 months! I don’t know about you, but I’d say that’s pretty exciting.

So if you’re trading in the market, there are quite a few different things that you could be trading. Let’s explore some of what you might see as you browse the open market.

1)      Bonds – I think everyone has heard of bonds in this world. I don’t know the exact date they were used, but I can say with absolute certainty that they’ve been around for at least 100 years. So what exactly are bonds? When a company wishes to expand their business or wants to improve their current technology (or if they simply are struggling with cash flow), they can issue bonds, which is almost like an IOU from the company. You can buy bond shares from corporations or the government, and you are acting as a lender to that agency. They promise to pay you back your money along with interest. For the most part, bonds are quite safe, but if the company goes out of business, then it is quite possible that you never get your loan paid back. This is why you see ratings on each bond. If they receive a high rating that means it’s very unlikely that they’ll fold up, but you’ll also probably earn a much lower percent interest since there is little risk.

2)      Foreign Exchange – Many people avoid trading forex (which means trading foreign exchange funds) because it seems quite complex, but the concept is actually quite simple. If you have one United States dollar and wanted to exchange it for a Euro today, you’d receive a certain amount of money in Euros (I won’t give a value because this is always fluctuating). Now, let’s say the U.S. government issues a bunch of new money and puts it into circulation. Suddenly, the rest of the world doesn’t value our dollar as highly as what they once did. So, with your dollar, do you expect that you’ll receive more or less Euros with that dollar than before? Less of course! This is the basic concept of forex trading, which is actually quite exciting because currencies fluctuate up and down every minute of the day, just like the stock market!

3)      Mutual Funds/Index Funds – These funds are simply a combination of many different stocks that can be purchased within one fund. There are a large variety of mutual funds on the market. Their main investments can range from fast food restaurants to jewelry retail stores. If you want to invest in real estate, but don’t have the capital, you could find a mutual fund that invests the majority of its funds in real estate. Index Funds are very similar, but instead of focusing on a particular sector of business, they model a certain index like the S&P 500.

1 thought on “3 Different Types of Trading

  1. Learning the 3 different types of trading is very important, specially for those who are planning to enter business. Some people who venture into business don’t know about the types of trading, especially the small businessmen. The lessons learned in this article is also useful for the people so that they have vast overview about business.

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