For the owner/operator of any business, there are multiple factors on which your success can hinge. These factors can be seen operating at local, national or international levels – and there are some that can be controlled. There are, however, those factors that are part of the bigger picture. And this is where having knowledge of the financial markets can provide benefits.
To someone unfamiliar with the characteristics of financial markets, building an understanding of these markets can seem like a daunting prospect. But the barriers are coming down. Online trading platforms make the markets more accessible than ever before. And, with it, comes the opportunities to develop your knowledge and use it to enhance your business performance.
Using markets as a barometer for confidence
One compelling reason for ‘knowing’ the financial markets is the confidence it demonstrates in the economy – whether that’s your home market or the wider international outlook. The trend towards globalization has linked economies together more than ever. So, this is not only about seeing how national factors like inflation can affect your business – but events elsewhere too.
The markets provide a barometer for business confidence. And this is important because of the impact it can have only your ability to achieve growth. Increased confidence in the overall state of the economy means financial institutions, for example, will be more willing to provide capital. After all, a business is unlikely to hold the reserves to make all the spending decisions it wants.
Take products and services beyond borders
One area of investment that a business can benefit from is international expansion. According to research from FedEx, 75% of US small businesses believe selling to international customers is “important to the growth of their business”. But doing so in a way that facilitates growth can be made harder without knowledge of global markets – particularly foreign exchange (forex).
Getting an insight into these markets can offer valuable insight into the volatility of exchange rates and how to best mitigate fluctuating costs. In addition, market knowledge can better help you appreciate the strengths and weaknesses of a target region. This can include anything from tax requirements to import tariffs and even broader supply and/or demand considerations.
Is there such a thing as ‘speculate to accumulate’?
When it comes to the financial markets, there is a well-known saying that some traders live by – and that is you have to “speculate to accumulate”. In essence, it is the balance between risk and reward when it comes to investment decisions. But, without knowing what drives financial markets, it is very unlikely that you will be able to spot the opportunities – or warning signs.
The investment decisions that you’ll make on behalf of your business can be to any number of ends. It could be the means by which you grow your profits, diversify your returns or create a safety net, for example, in the form of high-yield bonds. Learning more about what is available and how these markets work is essential to ensuring that profitable returns are then achieved.
By building up your knowledge of the financial markets and how to trade in them, you have the potential to create opportunities for your business – no matter how large or old it is. These may be short-term opportunities, while others demonstrate their worth over a longer period. But the knowledge you can gain can ensure no inappropriate risks are taken in search of the rewards.