Securities can be broadly described as negotiable financial instruments that can be traded for value and are governed by securities law, as described in the video. Securities allow for the movement of capital from those who have it to those who don’t. We will take a closer look at the types of securities and what role they play in financial markets.
There are different types of securities, namely, equity, debt, and derivative securities. Equity securities are financial assets that represent ownership claims held by shareholders in a partnership, company, or trust.
They can rise and fall in value depending on the company’s performance.
Debt securities are commonly issued by governments or companies and are sold for a specific amount with a promise of interest and repayment. They often include bonds, treasury notes, and banknotes. Most people view them as investment opportunities.
Derivative securities sanction an investor to trade a security on predicated terms. They allow investors to buy or sell shares of an existing security at a certain price in the future. It’s important to understand how they work to avoid disappointments.
Securities allow the flow of capital and resources from those who hold ideal resources to those who need them. As such, securities represent the most common investment contracts. Securities allow investors to buy or sell assets with ease.
In a nutshell, securities propel a saving culture, spur investments in the financial markets, and provide liquidity for investors and the public. They enable companies or governments to raise capital and investors to trade on previously issued stocks. In this regard, securities are truly the backbone of financial markets across the globe.
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