Financial markets

Hi! Today I would like to share some interesting stuff regarding the basic things one needs to know before investing in financial markets. To start with, why do financial markets exist? The sole reason for the existence of financial markets is that people should be able to balance between their expenditure and consumption over time. This is carried out by borrowing and lending. For an investor to assess the worth of an investment made, financial markets provide a benchmark against which a proposed investment is compared. The basis for a test of any proposed investment to pass is that its interest rate should be on par in comparison with the benchmark of financial markets. Thus, the sole purpose of existence of financial markets is to give the individual, corporate companies, and even the government a standard of comparison for taking important economic decisions.

Experts say that a proper investment decision can be made only when one can feel the pulse of the financial markets, irrespective of the individual’s preference for consumption in the current year versus the next year. An individual needs to compare a proposed investment with the alternatives available in the financial markets.  In addition to rules like the NPV which tells us how to decide on the various investment alternatives available, the financial markets also provide us with the tools which may be of great help to acquire funds to make investments. To sum up, financial markets guides us on how to make a worthy investment.