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Reflection Paper in Financial Markets

Financial markets provide a place for businesses, investors, and governments to raise money through the sale of assets like stocks, bonds, and real estate. They allow savings to be efficiently directed towards investment and production, lowering unemployment. Financial systems facilitate intermediation between savers and borrowers, allocating resources for economic growth. Stock markets enable public trading and exchange of company shares. Mutual funds pool investor money for professional management across diverse securities. Bonds are loans issued by governments and corporations to fund projects, and can be held to maturity or traded. Mortgages allow individuals to borrow money long-term to purchase real estate. Real estate investing encompasses not just property sales but also related fields like financing, management and development.

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419 views3 pages

Reflection Paper in Financial Markets

Financial markets provide a place for businesses, investors, and governments to raise money through the sale of assets like stocks, bonds, and real estate. They allow savings to be efficiently directed towards investment and production, lowering unemployment. Financial systems facilitate intermediation between savers and borrowers, allocating resources for economic growth. Stock markets enable public trading and exchange of company shares. Mutual funds pool investor money for professional management across diverse securities. Bonds are loans issued by governments and corporations to fund projects, and can be held to maturity or traded. Mortgages allow individuals to borrow money long-term to purchase real estate. Real estate investing encompasses not just property sales but also related fields like financing, management and development.

Uploaded by

Lizzy Mondia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Reflection Paper in Financial Markets

Introduction to Financial Markets

Financial markets is a type of a marketplace that provides a place or avenue for


businesses, big or small, or investors, or debtors for sale and/ or purchase of assets such
as bonds, stocks, foreign exchange, and derivatives where they can raise their money or make
money for their business for them so they can hire, invest and grow. Also, it financial markets
doesn’t focus only to private businesses, they also offer and provide individuals and even
government organizations an access to capital such as helping the government to pay new
roads, schools and other public facilities. And last, with the help of financial markets, where
there is efficient direct of flow of savings and investment in the economy in ways that facilitate
the accumulation of capital and the production of goods and services, the unemployment rate
becomes lower because it offers many job opportunities.

Financial System

Under Financial markets are different markets and systems which helps an economy to
grow and develop. The financial system is broadly in line with the economy’s level of
development. It plays a critical role for consumers – both corporates and individuals –
because it enables the financial intermediation process which facilitates the flow of funds
between savers and borrowers, thus ensuring that financial resources are allocated efficiently
towards promoting economic growth and development. Financial system is developed in
banking industry because of the nature of fiat money. Where making sure that banks operate in
a safe and sound manner is in the public interest and when it operate well the economy will also
operate smoothly. Banks, after all, manage our savings, offer critical services in the transfer of
funds and the payment of obligations, while providing a venue for entrepreneurs to pursue their
economic plans through credit.

Stock Market

Stock Market is one of the well-known markets where we can make and grow money.
Stock market is where collection of exchanges and other venues where the buying, selling, and
issuance of shares of publicly held companies take place and each of those shares comes with
a price, and investors will make money with the stocks when they perform well in the market. It
is easy to buy stocks however; the real challenge is in choosing the right stocks that will earn
money for the investor in order for them to make money more. This is why Stock markets are
vital components of a free-market economy because they enable democratized access to
trading and exchange of capital for investors of all kind and it performs several functions in
markets, including efficient price discovery and efficient dealing.

Mutual Funds

Mutual Funds are pools of money owned by a group of investors and managed by
professionals for the purpose of investing in stocks, bonds, or other securities. When we
purchase a mutual fund, we are pooling money with other investors and when it is pooled
together the fund manager will invests it. Investing in a Mutual Fund has pros and cons such as
by its management where professional manage it. Where in mutual funds are actively managed
by a professional who constantly monitors the fund however mutual funds typically charge a
high management fee and operating expenses. And since mutual funds are managed by a
manager, there is a loss of control when investing in a mutual fund. Also mutual funds possess
high liquidity which means we can able to sell our mutual funds within a short period of time if
needed.

Bonds

A bond is a fixed income instrument that represents a loan made by an investor to a


borrower. A bond could be thought of as an I.O.U between the lender and borrower that
includes the details of the loan and its payments. Owners of bonds are debt holders, or
creditors, of the issuer. The advantages of investing in bonds are we receive income through
the interest payments while hold the bond maturity and get our entire principal back. In this
case there is no loss in bonds however bonds pay lower returns than stocks. And when it
comes to making profit, we can resell the bond at a higher price however companies can
default on your bonds and bonds yields can fall. Governments and corporations commonly use
bonds in order to borrow money. Governments need to fund roads, schools, dams, or other
infrastructure same as corporations for them to grow their business, to buy property and
equipment, to undertake profitable projects, for research and development, or to hire
employees. 
Mortgage

Mortgage refers to a loan used to purchase or maintain a home, land, or other types of
real estate. It is where the borrower agrees to pay the lender in a specific time, typically in a
series of regular payments that are divided into principal and interest. Individuals and
businesses uses mortgages loan to buy real estate without paying the entire purchase price up
front. It helps many people owning a property possible and makes property affordable because
it would take too long to save up. The borrower repays the loan plus interest over a specified
number of years until they own the property free and clear. Mortgages are also known as liens
against property or claims on property. If the borrower stops paying the mortgage, the lender
can foreclose on the property.

Real Estate

Many people tend to think when they hear Real Estate are just consists merely of
brokers and salespeople. However, Real Estate is not just about properties itself or buying and
selling lands and houses. In fact, millions of people earn a living through real estate, not only in
sales but also in appraisals, property management, financing, construction, development,
counselling, education, and several other fields such as if we buy a physical property we can
make money in earning revenues from rent or leases. However unlike other investments, real
estate is dramatically affected by its location. Factors such as employment rates, the local
economy, crime rates, transportation facilities, school quality, municipal services, and property
taxes can drive real estate prices up or down. Just like other investments, Real Estates has
pros and cons. Pros are it offers steady income, monthly or base on contract income. It also
offers capital appreciation when time passes by and diversifies portfolio and can be bought
with leverage. The cons are it is usually illiquid. Influenced by highly local factors and requires
big initial capital outlay which may requires an active management and expertise.

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