Financial securities are instruments of value that can be traded
Financial securities are instruments of value that can be traded. They consist of a variety of tradable assets that represent debts or ownership. Securities that represent ownership are stocks and securities that represent debts are bonds. Individuals and organisations can participate in financial markets through investment vehicles called securities.
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Types Of Financial Securities
Securities serve as investment vehicles, allowing organizations and individuals to engage in financial markets. Various types of securities available on the stock market include:
Equity Securities
Equity securities represent ownership in companies. Investors get profits through dividends and increases in stock value.
Debt Securities
Individuals, corporations, or governments issue debt securities to raise capital, selling them at a specific amount to be repaid with a specified interest by the maturity date. Furthermore, bonds, treasury bills, and notes are examples of debt securities.
Hybrid Securities
Hybrid securities combine the characteristics of equity and debt securities. Bondholders can convert convertible bonds into common stock, while investors have the option to convert preferred shares into common shares.
Derivative Securities
Derivative securities derive their value from underlying assets that can be repaid or purchased. The seller doesn’t necessarily need to own these underlying assets, as the buyer can receive repayment either in sufficient cash for the assets or through a derivative that fulfills the debt obligation.
Asset-Backed Securities
Asset-backed securities are a part of a group of similar assets that generate income such as; mortgages, leases, and loans.
How To Trade Securities on the Nigerian Stock Exchange (NSE)?
The Nigerian Stock Exchange serves as the primary platform for trading securities on the Nigerian stock market. Additionally, licensed online brokers play a crucial role in facilitating the trading of securities listed on the NSE. Depending on the brokerage platform, investors can access a wide range of securities to invest in, including ETFs, mutual funds, stocks, and bonds, thereby offering opportunities to build a diversified investment portfolio.
Difference Between Securities and Stocks
Stocks refer to equity securities that represent ownership in a corporation, while securities consist of a broader class of assets including stocks, debt, and bonds. Therefore, while all stocks are securities all securities are not stocks.
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