These are the ten concepts you should know before you start investing

Investment can be an alternative to generate profits and escape from inflation

Rampant inflation, mortgages heading for months of frantic rises and skyrocketing food prices are some of the factors that are contributing to life becoming more expensive , inevitably making the purchasing power of citizens be diminished. Given this situation, it is not surprising that people decide to look for alternatives to generate profits and thus be able to escape unleashed inflation such as investment.

However, investing is not an easy task, therefore the Bank blog explains that the person who is going to do it for the first time must take into account a series of basic concepts that will be of great help:

  1. Primary market : This is also known as the financial asset issuance market and they are places -both physical and virtual- where companies and governments collect funds from the public , through the issuance of new securities. In this sense, investors buy newly created securities that are purchased directly from the issuer, unlike secondary markets where previously issued securities are traded.
  2. Secondary market: This market, also called trading, is dedicated to buying and selling securities previously issued in the primary market. In this regard, the main secondary markets are stock markets, the public debt market and the futures and options markets. This is where supply and demand intervene and liquidity is given to the economic system.
  3. Limit order: This order is launched on the market by setting a maximum price at which you want to buy or a minimum price at which you want to sell. Therefore, for this, an order expiration date is established which, in the case of the market, is usually a maximum of 90 days .
  4. Order for the best : These are the ones that are launched on the market without setting the price at which we want to buy or sell. However, unlike the market order, in this case you will want to buy at the best price available at the time. Therefore, if there are not enough titles to fill the order in the best position, the rest will be pending until there are titles again at that price .
  5. Market Order : This order is placed on the market to be executed in its entirety at a non-exact price , quickly, provided there is sufficient liquidity, and at the best available price.
  6. Volatility : This is a term that refers to the intensity of the variation of the trajectories or fluctuations of the prices with respect to their historical measurement. Volatility can help discriminate between assets due to their variability, so a high variability of an asset means that its price has behaved with significant fluctuations with respect to its average value.
  7. Blue chips : This concept is used in the stock market and refers to those listed companies with less volatility, that is, they present little financial risk and in addition to not needing large capital increases. Most of these have established the payment of dividends of overall way.
  8. Small caps : This term used in the stock market is to refer to  companies that have low capitalization and higher volatility . These companies are attractive to certain investors due to their potential for appreciation.
  9. Goodwill : This concept refers to the increase in the market value of an asset . As long as the asset is held and is not sold, we speak of latent or potential capital gains.
  10. Loss : This is the reduction in the market price of the value of the investment, that is, when the current price of a financial asset is lower than what was paid at the time of its acquisition . As long as the asset is not sold, we speak of potential or latent losses.
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