FINANCIAL MARKETS

DIFFERENCES MONEY MARKET BOND MARKET EQUITY MARKET FOREIGN EXCHANGE DERIVATIVES MARKET
MARKET

Nature/Description Money market basically The bond market
refers to a section of the describes a marketplace
financial market where where investors buy debt
financial instruments with securities that are
high liquidity and short- brought to the market by
term maturities are traded either governmental
entities or corporations.
Equity market is a market The foreign exchange The derivatives market
in which shares of market is the place refers to the financial
companies are issued and where money market for financial
traded, either through denominated in one instruments such as futures
exchanges or over-the- currency is bought and contracts or options that are
counter markets. sold with money based on the values of their
denominated in another underlying assets.
currency.

Term of Investment Involves the purchase and A bond is a debt security, In the equity Most transactions in the when a person invests in
sale of large volumes of similar to an IOU. market, investors bid for foreign exchange market financial markets to reduce
very short-term debt Borrowers issue bonds to stocks by offering a are for portfolio the risk of price volatility in
products, such as overnightraise money from certain price, and sellers investment exchange markets.
reserves or commercial investors willing to lend ask for a specific price.
paper. them money for a certain
amount of time. 
Financial Short-term Treasuries, Credit cards, credit lines, Equity securities refer Foreign exchange Derivatives are financial
Instruments Traded certificates of deposit, loans, and bonds can all to shares in companies, instruments are financial instruments that derive
commercial paper, be types of debt while debt securities instruments that are their value in response to
repurchase agreements, instruments include both government represented on the changes in interest rates,
and money market and corporate bonds. foreign market and financial instrument prices,
Debt securities can also primarily consist of commodity prices, foreign
refer to preferred stock currency agreements and exchange rates, credit risk
and forms of derivatives.  and indices.
collateralized securities

Who can invest? Any individuals can invest Individuals, organizations, Any Individuals above the Comprised of banks, Hedgers, speculators,
in the money market by and even foreign legal age, and by opening commercial companies, arbitrageurs, and margin
buying money market governments can buy a brokerage account with central banks, investment traders.
funds, short-term these bonds in exchange one of the many firms, hedge funds and
certificates of deposit.  for the money the brokerage firms. retail investors, the
government needs, and foreign exchange market
will be known as creditors allows participants to
or debt-holders. buy, sell, exchange and
 speculate on currencies. 

How to invest? An individual may invest in Purchase bonds in a By purchasing shares of The most popular way to Derivatives may be traded
the money market primary issuance, by that company in the stock invest in currencies is over-the-counter (OTC)
by purchasing a money filling up the application market by trading currencies in
market mutual fund, form provided by the the forex
buying a Treasury bill, or manager to the issue to
opening a money market the lead manager. Or you
account at a bank. can go through a broker.
Where to invest? Investors can purchase or bonds are traded over You can approach a The Forex market is Can be purchases through a
redeem shares of money the counter, meaning financial advisor who will highly profitable. In brokerage-dealer network,
market funds that you must buy them guide you on what to buy, comparison to the stock
through investment fund from brokers. and then purchase the market, where you only
companies, brokerage funds for you. equity make a profit when the
firms, and banks. funds from a fund house value of your stocks goes
directly. up, even when your
currency is going down,
you have a lot of money
to make in Forex.
How will the These funds typically invest Hold bonds until their Sell stock shares at a Currencies are traded in You can buy the lot in future
investment earn? in short-term debt maturity date and collect profit, buy low, sell high. pairs. Buying and selling or option contract by paying
instruments, and they pay interest payments on currency can be very only a part of the price of
out earnings in the form of them. profitable for active the lot. In most cases you
a dividend. traders because of low need to pay about 20% to
trading costs, diverse 30% of the price of the
markets, and the contract. So, while trading
availability of high in derivatives you have the
leverage. chance to earn more profit
by investing less.