Posted on Monday, 23rd March 2009 by admin

money-stolenAs we saw in our previous post, there are a lot of different stock exchanges in North America. It is also interesting to see that there are not only company stocks that can be traded on those stock exchanges. In fact, you can do a lot more than buying and selling stocks on them.

Company Stocks (Equities)

The most common transactions will be done on company stocks, a.k.a. equities. These titles represent a share of a public company. We call them “public” because they are offering individuals (and institutions) to buy shares of their company.

Stock Options

Based on the price of company stocks, stock options are a financial instrument that conveys right, but not obligation, to trade a specific stock (buy or sell) at a specific price in the future. There is usually a time frame related to the stock option.

Futures

Futures are similar products to stock options as they represent an agreement between two parties to trade a commodity (example gold) or a financial instrument (like bonds) at a specific price in the future (at a specified date). Please note that contrary to stock options; a future is a contract conveying the obligation to do the trade (but you can sell the contract before it expires).

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Exchange Traded Fund (ETF)

Usually called ETF, exchange traded funds are investment products traded as any other stocks. They usually represent an index such as the Dow Jones index or the S&P 500 index (regrouping the 500 biggest companies on the NYSE). Their main advantage is to regroup several companies into one title but they have lower management fees (called MER’s) than mutual funds.

Bonds

Bonds are a debt instrument over more than a year with the purpose of raising capital. Countries, provinces, states, cities and companies can issue bonds. When buying a bond, you buy a right on the assets of the issuer and should receive your capital back along with a defined interest rate.

Mutual Funds

Mutual funds or investment funds are money from different investors pooled together and manage by portfolio managers. There are tons of types of mutual funds (ethic, growth, balanced, dividend, etc). The main advantage of this type of investment relies in its diversification (holding several equities at the same time).

Structured Products

Structured products are financial instruments created from derivatives (options and futures) and other financial products. They are able to give you the best and the worst of the capitalism market. Structured products such as credit default swaps are partially responsible of the current economic crisis.

Posted in Stock Markets | Comments (202)

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