Investment qualities of securities. The concept of the securities market. Main types of securities

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Today, the popularity of securities as an investment tool is constantly growing. At the same time, they are increasingly being acquired by small investors who poorly understand the economic essence of such a financial instrument and do not know how to evaluate the investment qualities of securities.

A security can be described as a type of financial obligation thatconfirms the owner's right to receive profit or own part of the issuer's property.

Before you buy the debt assets of any company, it is important to assess the investment quality of securities. The most important characteristics to be assessed are:

- liquidity - the ability of financial instruments to be quickly and without significant losses converted through sale into cash;

- profitability is the possibility of capital gains in the event of the purchase and subsequent sale of a security;

- investment risk - the possibility of partial or complete loss of funds invested in any financi altool;

- negotiability is the ability of paper to be sold and bought on the market.

All these characteristics affect the present and future value of an asset.

It can be said that the investment qualities of securities depend on the type of financial instrument. The characteristics of the paper may be influenced by: the financial well-being of the issuer, the reliability and safety of investments, as well as

possibility of conversion.

In general, the stock market is a set of relations related to the issue and circulation of financial instruments. The classification of the securities market is determined by the practical value:

- according to the purposes of the market functioning, primary and secondary are distinguished. The first represents the relationship regarding the initial placement of securities between investors, the second - the subsequent trading of already placed instruments;

- according to the degree of organization, organized and spontaneous markets are distinguished;

- depending on the type of circulating stock values - stock markets, bonds and the like;

- in the category of financial instruments - markets for basic and derivative securities.

Primary securities are financial instruments that are based on property law. The most common of these are stocks and bonds.

A share is a financial instrument that confirms the right

an investor for a certain share of the property of a joint-stock company,part of his profits, as well as the opportunity to participate in the management of the company. The share is an equity security, that is, the money received when it is issued belongs to the company and is not subject to return.

A bond refers to debt securities, it certifies a loan agreement between its issuer and holder.

Derivative financial instruments are based on price assets, which include: the prices of goods or underlying securities, the credit or foreign exchange market. Such assets certify the right or obligation of the holder to acquire or sell, according to certain criteria (price, quantity and time), the underlying asset. This group includes bills, options, bills of lading and many other instruments.

A promissory note is an unconditional obligation of the person who issued it to pay the holder a certain amount within a specified period.

An option provides the right, not the obligation, to purchase an asset at a set price.

Bills of lading are the unconditional obligation of the sea carrier to deliver the goods in accordance with the terms of the contract.

The variety of securities leads to the fact that the investor in the process of choosing investment instruments faces a wide choice. In order not to make a mistake when choosing an investment method, it is necessary to carefully study the investment qualities of securities.