FINANCIAL MARKETS
COMMODITIES
Commodities are unprocessed basic goods or natural products such as oil, coffee, gold, silver, and cocoa, which are widely exchanged and in large quantities. These products are considered uniform, that is, products that can be easily replaced by others because they have similar characteristics and serve the same purpose.
There are four main categories of commodities: a) agricultural products such as coffee and sugar; b) energy products such as oil and gas; c) metal products such as gold, silver, and copper; and d) livestock and meat products. Not all commodities have the same liquidity, and therefore, some are traded more than others like oil and gold.
INDEXES
An index is an indicator of the average price of the shares or assets that make up the index and generally represent a specific market. There are hundreds of stock indices worldwide, representing companies or industries at national, regional, and global levels. An example of an index is the Dow Jones, which measures the performance of 30 of the most significant stocks listed on the New York Stock Exchange, e.g. Apple, Coca Cola, Microsoft, Visa, Walt Disney, etc
You cannot directly trade or buy an index because it is not a product in itself, but an indicator of the assets that make it up. Considering the above, people who trade indexes use derivatives or mutual funds (ETFs), among others, to speculate on the price of the index.
STOCKS
Stocks are the parts into which the capital and property of a company is divided. Initial investors sell part of their stocks to get more capital for the company. Interested investors acquire part of the company’s property through shares and become co-owners in a percentage equal to the proportion of shares they have purchased.
Some companies go public to be able to offer their shares for sale to the public on a stock exchange. Among the most important Stock Exchanges are the New York Stock Exchange (NYSE), the Tokyo Stock Exchange (Tokyo Stock Exchange) and, the London Stock Exchange (London Stock Exchange).
ETFs
A listed investment fund or “ETF”, is an investment fund that trades through stocks on the stock market. This means that you can buy and sell stocks in the fund at any time like any other stock.
ETFs invest in assets or stocks following a specific benchmark such as the DOW JONES or the Nasdaq 100. Every time you buy a share in a listed fund you are buying a small part or a small percentage of all the assets that the fund has. ETFs have the advantage that they offer diversification and liquidity.
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