How to navigate the financial markets

Tim Bennett explains workings of the financial markets, and gives three rules of thumb for novice investors.

Financial markets exist for one reason: they bring investors (or lenders) together with borrowers. The institutions that form the financial markets brokers, banks and so on make money by acting as the middlemen. Take a traditional high-street (or 'retail') bank. It takes your savings and pays you a return (in the form of interest). Your money is then lent out to individuals or companies who need loans or mortgages. As long as the amount charged to borrowers exceeds the amount paid to savers, the bank profits.

This is the basic template for everything that happens in financial markets. Every instrument or security that has ever been created exists to facilitate the transfer of capital from those who have it to those who need it and, never forget, to make money for the bank that creates it.

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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.