An Overview of the World of Finance“Finance is a broad term that describes two related activities: the study of how money is managed and the actual process of acquiring needed funds.” Investopedia
Finance is a general word used to describe the study, creation and management of money, including any action or transaction that involves investing in any form of financial instrument. Finance is often divided into three distinct categories:
refers to the analysis of an individual’s or family’s financial standing, including income, expenditure and potential short and long-term requirements. This analysis is conducted to develop a plan to fulfil those requirements, while considering certain financial constraints.
deals with the ways in which businesses and corporations obtain financing. These methods can differ from business to business and include bank loans, lines of credit, investments from various sources including venture capitalists and angel investors, or the sale of shares or corporate bonds.
describes finance as related to sub-national entities including states or provinces, counties, municipalities and districts. National governments are responsible for allocating available resources to said entities, to provide a stable economy and prevent market failure.
Finance and the Internet“…many institutions are racing to combine new technologies, including cloud computing, artificial intelligence and voice recognition, to help provide financial services.” – Financial Times
The advent and ubiquitous adoption of the internet around the globe has had a massive effect on the world of finance. Continuous innovations in technology have made areas of finance previously only accessible to banks and large corporations, such as online trading, available to the everyday consumer.
A good example of the growth in both accessibility and popularity of online trading is the Foreign Exchange or Forex Market. Previously the trading of currencies was reserved for banks and major institutions, but retail traders are now able to invest in global currencies from the comfort of their own homes. The Forex Market has grown exponentially over the last decade, with an average daily trade volume of $4.8 Trillion (as of January 2016), making it the most liquid market in the world.
Total FX volume falls
- Business Insider
The Banking System
The banking system is an important, if not crucial, part of finance and the overall global economy. Responsible for the transactions of trillions of assets worldwide, the health of a country’s banks has always been linked to the health of its economy.
Banks, however, are just one part of global finance, standing alongside other institutions that profit from the creation and flow of money including:
- Investment Banks
- Insurance Companies
- Finance Companies
- Investment Managers
Due to how much international commerce and personal wealth rely on the existence of a healthy banking system, it is also one of the most strictly regulated systems in the world.