Hello everyone
The subject of this week’s article is basic finance education, which is the 2nd item of my first article (https://medium.com/%40ataxbt/borsaya-ilk-ad%C4%B1m-77626f01c6f0).
First of all, before utilising your money in the market, you need to discover yourself and then the market dynamics. For example, if you are going to make a long-term investment, you and the market should have a suitable structure. If you take an action that suits you but does not suit the market or vice versa, you will probably close the position at a loss.
The market is a very comprehensive field and there is no limit to knowledge in this field. Financial instruments such as stocks, bonds, foreign exchange, commodities and derivatives are traded in these markets. In order to understand these instruments, there are some entry-level things we need to know:
1- Basic Finance Concepts: It is important to understand the basic concepts in financial markets. Understanding basic financial concepts such as stocks, bonds, interest rates, exchange rates, commodity prices, indices, price/earnings ratio (P/E), inflation, Gross Domestic Product (GDP) supports our investment decisions.
2- Market Types: Understanding the characteristics and functioning of different types of markets such as stocks, bonds, commodities, currencies, etc. helps us to determine our investment strategies. Each type of market has different risk and return profiles.
3- Interest Rates and Inflation: Economic factors, such as interest rates and inflation, affect investments.
4- Investment Instruments: It is important to recognise various investment instruments such as stocks, bonds, commodities, currencies, ETFs and funds and understand their risk-return profiles.
5- Fundamental and Technical Analysis: It is important to learn fundamental and technical analysis methods to understand financial markets. Fundamental analysis aims to value companies/projects by examining fundamental data and economic factors. Technical analysis aims to predict future price movements by examining past price and volume data.
6- Investment and Risk: It is important to understand the risks you may face when investing, diversify your portfolio and develop risk-reward strategies to reduce risks. The risk/reward ratio is basically the ratio of the amount you risk in an investment in an asset to the gain you target.
7- Investment Strategies: There are different investment strategies such as long-term investment, short-term trading, value investing, growth investing. You should choose investment strategies suitable for your goals. Long-term investments generally carry lower risk, while short-term investments offer the potential for faster returns but involve higher risk.
8- Portfolio Diversification: Diversifying your portfolio is critical to reduce risk. You can balance your portfolio by investing in different asset classes and sectors. If you spread the risk instead of being overly dependent on a single asset. You will reduce the risk you will take.
9- Impact of News and Events: Events such as economic data, political developments, natural disasters can affect the markets. Following these factors can provide you with great convenience in managing your portfolio and at the same time, it will also provide you with gains in terms of seeing instant new opportunities.
Although financial markets seem quite simple from the outside, they actually have a complex structure that moves with the triggering of multiple intertwined conditions. It is impossible for us to completely solve this structure, but it is not very difficult to understand the basic lines.
The essence of the job is to invest in various investment instruments by learning to read basic concepts and data, analysing and managing our risk.
Thank you for reading
