Financial Markets can be catchy to understand, but, aback they play such a huge role in a lot of of the western, developed worlds, it's acute that you accept what they are. Humans can either become acutely affluent through them or they can lose aggregate they have, including the shirt off their backs.
It's not difficult to accept why Financial Markets abash people. There are 2 definitions that are absolutely different, admitting they complete similar.
Definition 1: A Financial Bazaar is an ORGANIZATION that takes allotment in trading, such as banks, the banal exchange, etc....
Definition 2: A Financial Bazaar is the ACT of trading, amid buyers and sellers.
Do you see the difference? On the one hand, a Financial Bazaar is an organization, while on the added duke a Financial Bazaar is a blazon of action. Both definitions circumduct about "Trading", which is an activity performed by buyers and sellers.
For instance, you wish to buy a abode so you ask for a accommodation from a bank. The coffer says "Ok, actuality is the $250,000 you charge appropriate now, but you accept to PROMISE to pay us a little bit of money every ages for a amount of years and, in the end, you will be paying us added than $250,000." Congratulations, you just fabricated a trade. You got $250K from a bank; they got a affiance from you to pay added than that - later. So you fabricated a barter and the both of you were accommodating in the Financial Market.
Why do Financial Markets Exist?
Financial Markets abide for a lot of reasons, but the capital acumen is exemplified above. They abide so humans who charge money (Borrowers) can acquisition the humans who accept the money and are accommodating to accommodate it to them (Lenders). It's an complete call in a chargeless bazaar abridgement area money equals freedom. The added money you have, the freer you are to be, do and accept what you want.
Thanks to the Financial Markets, humans are able to abutment themselves and others. Humans can abutment their ancestors by purchasing a $250,000 home for a atom of the price. Usually, you just pay a baby up-front fee and again a baby annual payment. Financial Markets aswell acquiesce humans to abutment businesses and accomplish some money themselves. Say you wish to buy banal in a company. In aftereffect you're saying: "Hey, I like your aggregation and I anticipate that you will yield the money I accord you and use it to accomplish even added money for your company. Oh, and again you'll accord me my money aback additional a bonus, right?" That 'bonus' is usually alleged a Dividend.
The Financial Bazaar is like AIR for our economy. Without it, the abridgement would absolutely die.
Who are Lenders and Buyers?
To put it simply, Lenders and Buyers can be people, companies or organizations. Whether they're a Lender or Buyer depends on their role in the "Trading" process.
If you're allurement for money, you're a Borrower. You borrow money from a bank, right? A aggregation borrows money from you if you buy their stock. Did you apprehend that? Governments borrow money from humans by affairs Bonds. It's like an IOU from the Government.
If you are handing the money out, assured to get it aback later, with added - again you're a Lender. That 'extra' allotment is alleged Interest. "Sure, I'll accommodate you $10 today, if you accord me $12 tomorrow." You answerable $2 annual of Interest. If you bought banal in the aggregation - you were the Lender in that case. You're aswell a Lender if you put money in a accumulation annual or Money Bazaar annual in a Bank. You don't accept to put it there, but if you do, they use your money to try to accomplish added and you get paid Interest.
Financial Markets accomplish our developed apple turn. You now accept a able butt of the basal concepts. You apparently apperceive added than the majority of people. Don't stop here, though, because the added you know, the added you can EARN.