What are Securities?

Hi and welcome to another insightful episode from Kalkine. In today's episode, let's talk about what are securities and its types. A negotiable financial instrument holding some kind of monetary value, which can be issued by the government or a company is termed as a security. Having said that, securities can be bonds, stocks, interest-bearing treasury bills, mutual funds, derivatives, debentures, notes and warrants. It's a tradable financial instrument. It is worth noting that a security entitles the holder to ownership of a portion of publicly traded company as it is listed on the stock exchange platforms. Issuers can look for security listings on the stock exchange to draw investors by ensuring a regulated and liquid market in which to conduct trade. Coming to types of securities, securities can be broadly classified into three types. The first being equity securities. Shares are categorized into equity securities segment. A shareholder owns a part of firm which issues the shares in a question. The shareholder gets right to participate in the firm's decision-making process and can receive dividends too if the firm operates with profit. It is imperative to note that equity securities fall or rise in values in line with the firm and financial market's fortunes. The second kind is the debt securities. These securities are issued by the government, a company or an individual and are sold to parties for a specific amount along with a promise of interest plus repayment. Debt securities include a maturity date, a specified rate of interest, and a fixed amount. Examples of such securities comprise of bonds, treasury notes, and bank notes. Notably, while purchasing a bond, an investor does not get any right to participate in the firm's decision-making process while he or she is entitled to the reimbursement of interest and principal. The third kind are the derivative securities that offer the right to trade one's financial securities at pre-decided terms. For instance, option contracts are classified under derivative securities, which provide an investor the right to sell or buy shares at a specific price of an existing security by a certain date in future. With that, now let's talk about the importance of securities in the financial market. Securities are issued by the company or government to raise funds. Moreover, the securities market allows capital flow to those who need it from those who have it. In other words, the securities market supports the movement of resources or funds from those who hold idle resources to those who have a productive requirement for them. In a nutshell, securities market helps in industrialization via investment fund allocation, saving mobilization, and maturity transformation. That's all for today. If you liked the information, click the bell icon and subscribe to our YouTube channel. And for regular updates and information, log on to our website, kalkinemedia.com. And as we say it, stay apprised and invest wise with Kalkine.