Investment Securities

Investment securities are the documents indicating money lent to some company or the government.

This money lent is refundable over a period of time and the documents are commonly purchased from the stock market. However, proper scrutiny should be done before buying them as some stocks may appear favorable for one person at one point of time, but the same may not be applicable to another.

The investment securities play a significant role in the world of financial system. However, big businesses move around various investment securities.

Investment securities certainly provide much higher earning returns than merely having simple saving accounts in a bank or some term deposit accounts.

Basic Investment Securities

The basic investment securities are investment bonds, commodity investments, investment equities and derivative investments. Investment securities are mainly of two types, equity securities and investment securities. The equity securities are common stocks, while the debt securities are bonds, bank notes and treasury bills. A corporation or an entity issues such securities and are called as the issuer.

Main types of investment securities

Bond - Bond is a debt security for a specific period. The issuer pays a predetermined rate and these bonds can be issued by government agencies, credit institutions, public authorities and corporations.

The principal amount invested in these bonds is repaid on the maturity date. The issuer pays a lump-sum after maturity or the interest is received in intervals.

Bonds earn fixed income as interest. Bonds are categorized as treasury bonds, treasury notes, participating bonds, bearer and registered bonds, revenue bonds, zero coupon bonds, high yield bonds, convertible bonds, warrant bonds, indexed bonds and sinking bond funds.

Equities are also referred to as shares and this gives you the ownership to a certain percentage in a company. Generally, people opt for equities and invest in common stock, par value, preferred stock, book value, treasury stock, stock splits, dividends and depository receipts.

Commodities are goods that are supplied by numerous suppliers with variation in quality. The commodities are tea, coffee, milk, copper, petroleum, coal, rice and wheat. Selling or buying these commodities is done as a contract and is known as a security.

Derivatives are financial instruments driving value from direct securities such as bonds and equities. These derivatives were earlier known as hedging instruments and some of them were index options, repurchase agreements, warrants, futures and swaps.

These investment securities are available to big businesses and common individuals. Knowing to leverage the financial investment securities using proper investment vehicles helps in reaching debt-free life.