Most Reliable Securities
What is a security? Securities are investments that can be traded on a secondary market. Securities allow us to own the underlying asset without taking possession. That is why securities are very liquid. Three types of securities There are three types of securities. They are equities, dept securities and derivative securities. Equities are shares of a corporation. Dept securities are loans, called bonds, made to a company or a country. To ensure a successful bond sale, borrowers must pay higher interest rates if their rating is below AAA. Derivative securities are based upon the value of underlying stocks, bonds or other assets. They allow traders to get a higher return than buying the asset itself. Pros and cons On the one hand, securities make markets more efficient. They simplify the search for those who need investment capital. On the other hand, since securities are so easy to purchase, individual investors may buy them rashly. What is more, when