Securities and Investments

Back in the days before the electronic era, when one made an investment, they were issued with a paper certificate or a note of some sort. It is these paper certificates or notes that did serve as documentation for the investment that the investors had made in the particular venture and as well they did outline the terms of the investment. The paper certificates were as well known as securities and they were the proof one had for their investments. The securities actually could be bought and sold just in the same way that we see shares, stocks and bonds of the various mutual funds we have today.

Having said this, we can now get to the subject of the securities and financial market information as it is set up in the present day and age. Generally speaking, today when we talk of securities, this is used to refer to any form of a negotiable financial instrument, whether it is a bond, stocks, options of contract or shares of some mutual fund. To make it simple for one to comprehend, consider the term “securities” to be one that can be so interchangeably used with “investment” and “securities market” for “capital market”. Securities generally fall into three main categories. The main and broad categories into which securities fall into are such as; the debt securities, the equity securities and the derivative securities.

Debt securities are as well known as bonds. A business can borrow money to grow and expand its scale of operations and in most cases, they will borrow through the traditional means which are banks. Considering the element of risk that the banks have to deal with, they may not be able to lend as much to a business and as such will only lend to some limit in most cases. As a result of this, a business will have to go to the capital markets and there issue a debt security known as a bond. Now, as an investor, when you buy a bond, you are basically lending money to a company and they owe it back to you. The company as well must pay you the interest on the amount of the bond and this is what you earn as proceeds from the investment.

Then, there are the equity securities which are as well known as “stocks”. Equity securities or stocks come in where a business seeks funding for the growth and expansion projects by bringing on board additional investors, who may be private investors or where they go to the capital markets and issue securities in the form of publicly traded shares or stocks.
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