Investing in financial markets

18 7 2017 - 1 commentaire

Why invest in financial markets?


In the previous article we looked at the purpose of financial markets, we are now going to look at how investors benefit from the financial markets. Why are they interested in the financial markets, and why do they invest their capital there?

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investing in financial markets

Profitability in financial markets

The first factor that encourages an investor to invest money in financial markets is its profitability. Long term financial profitability on financial market assets is unmatched, it is higher than property investment or traditional banking services. This profitability is very variable and is never guaranteed, due to the possible price fluctuations. However, in the long term, the average profitability on financial market assets is 10% per year. Financial markets therefore offer the possibility of "making your money work" and so obtaining a return on your capital. At a fiscal level, capital gains tax is considered a deterrent to investing on financial markets, but numerous niches overcome its impact: innovative companies , time shares are held, etc.

Flexibility of financial market investments

The second advantage of financial market investments is that most financial markets are liquid, meaning that you can quickly, or even immediately, liquidate the funds invested. Unlike an investment which is completely locked for several years (life insurance, etc.), financial markets enable you to recover capital at any time without losing any of the proceeds. The availability of funds also enables you to manage your money in real time and to adapt your investments depending on current events, a sector's financial health of a sector or simply your own needs. It is always good to have control of your capital.

The diversity offered by financial markets

Financial markets also mean that you can diversify your investment assets, as the popular idiom goes "never put all your eggs in one basket". By diversifying their financial market investments, investors can expect a good return while covering the decline of another sector. The diversity of markets also means that investors can find the investment(s) that are suitable, among the myriad of financial assets available.

Investing in financial markets to understand the world today and in the future

Financial markets are also an excellent filter for understanding the world around us. To invest in financial markets you have to take an interest and to understand topics as diverse as:

  • Economics
  • History
  • Geography
  • Geopolitics
  • Politics
  • Finance
  • Taxation

and more generally follow the news, which is continuous. To be a prudent investor, you must be constantly connected to the world that surrounds us and to its news. Financial markets are therefore an excellent way to understand and to be interested in the news, which is a reflection of our world.

More than a simple vector of knowledge and learning, financial markets also lead you to being engaged and involved in economic life. Indeed, even if 90% of the market today is speculative, there are still between 10 and 15% of investments that have a concrete impact on the economy (and therefore on other speculative products). Financial markets are therefore an excellent way to support companies or economic models, which are believed to support the economy more generally.

Finally, be aware that if you do not invest your capital yourself, and you leave it to sleep in a bank account, this money is placed on the financial markets by people other than you: either directly by your bank, or by investment companies who manage dormant assets. When you invest your capital yourself, you decide and make choices yourself and so have the opportunity to direct your investment to assets that you know and that you are familiar with.

In closing, investing in financial markets quickly becomes a passion. In addition to the lure of gains, which is sometimes exhilarating, financial markets are exciting (and can even sometimes become addictive) as they are a reflection of our world, its good and bad sides. To understand the fluctuations of financial markets, it is better to understand the world, for this reason you must not think that the stock and financial markets are necessarily bad, they are a reflection of our society and of its individuals.

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