types of securities in stock market
On the stock market are performed thousands of operations with securities on a daily basis. The exchange became an integral part of the economy in any country of the world, resulting in a great number of tools that are different from each other depending on their functions. The article is devoted to all types of securities in stock market.
1. The main types of securities in stock market
To these instruments primarily include stocks and bonds.
A share is a security, which gives the right to its owner to a share of ownership of the joint-stock company, i.e. having a share - you are the owner of a proportionally to the owned by you share.
The income from the shares may come from different sides: firstly, the growth rate value - if the share was bought for a few years, i.e. long-term - it will certainly bring its owner a sought-after interest yield. Secondly, on the shares of each year the dividends are paid.
A bond is a loan, granted in favour of the organization, which released this security. I.e. if the investor had bought the bond - he is actually a credit organization for a certain period of time. Of course, loans free does not happen - and in the end of «life» bonds, the company pays the investor interest for the use in the form of coupon payments.
The size of these coupons are often not exceed the usual Bank interest and therefore investing in bonds is known as the analogue of a Bank Deposit.
In America in this matter went ahead and created a more modern type of stock exchange ETF Fund. The main difference is that the ETF traded on the stock exchange in connection with what has good liquidity. If an investor wants to buy an ETF - he needs to open an account on the American stock exchange NYSE and he can easily do it.
2. Derivative types of securities in stock market
With the advent of the major securities market appeared derivative financial instruments, because the need of hedge the risks of ownership of shares. Such instruments include futures and options.
Futures contract - a contract realization of the underlying asset, provided for in the contract. At the moment of conclusion of a futures contract, the seller and the buyer to negotiate only a period of delivery and the price level. The rest of the parameters of the transaction - the amount of the underlying asset, its quality and the details are spelled out in the contract specification on the website of the exchange. I.e. buying futures - the investor undertakes the obligation to buy the underlying asset. In the form of the underlying asset are usually shares.
An option is a contract that defines the right of it to do in case of favorable market conditions at the time of his execution. The basic asset of option may be shares and futures on shares.
Every year there are new types of securities in stock market with a view to implementing all of the new features. But a basic set of securities remains always.
