types of securities investment
All of the financial system is based on investment. Investments are investments of the funds, which carry out the commercial and noncommercial organizations, and also natural persons. When investment is available capital to commercial enterprises or to the state, which is necessary for their activities. Investors receive an income from the invested their funds in the form of interest or dividends.
types of securities investment: are bought and sold on the organized market of the two types of investors, institutional and private.
When organizations invest, their goal is to obtain the highest profit on the invested capital in the shortest possible time. On the decision of private persons on the types of securities investment influenced by factors such as yield, reliability and the possibility of growth of the foreign exchange value, liquidity of the securities and tax consequences.
The main determinant of the effectiveness of investments, is the yield. Fixed income bring such types of securities investment as certificates of Deposit, Treasury bills, corporate bonds, the preference shares.
In case, if the investor is the maximum capital gains (i.e., when the income from the sale of securities exceeds the price of their purchase), use the investment tools, as commodity and futures contracts, options.
If the main purpose of the investor is to ensure reliability of investments, that in the world practice, it is considered that in this case it is better to invest in government bonds. If we consider the types of securities investment commercial organizations, shares of the large and has a well-established reputation of a commercial company to be more reliable than the shares of the new company. When account is taken of factors such as liquidity, that is, how fast you can make the investments in cash, the ordinary shares may be converted into cash quickly.
When choosing a strategy of investing investors determine for themselves the principles of formation of the investment portfolio, which represents a combination of different types of investments. The investment portfolio should be formed диверсифицированно - so, in order to mitigate the overall risk of loss and that the loss of one investment is not influenced the condition of the portfolio as a whole.
There are the following types of financial investment:
Government securities. They are used by the government to raise the funds to Finance government expenditure. As a rule, state securities in the world practice more reliable, but bring a smaller percentage of the profits.
Corporate bonds. Corporations engaged in the issue of the three types of bonds:
1. The mortgage loans sheets (mortgage bonds) - they secured by real estate, which is at the disposal of the Corporation, and in the case of its bankruptcy can offset some of the losses of investors with the help of the sale of this property;
2. Дебентуры - security in this case is only the promise of the Corporation to pay, therefore, these bonds bear a high percentage of the investor;
3. Convertible bonds can be exchanged for the ordinary shares issued their company.
The higher the rating of the bond, the lower the risk associated with its acquisition, and the lower the interest paid to the holder of the bonds. Fluctuations of interest rates in the direction of increase may increase the benefit for investors, and Vice versa. The cost of a particular bond depends on term of its maturity.
The shares. The investor, who invests its money in shares of the company, became its co-owner, and the name of the shareholder. A shareholder participates in the election of the Board of Directors of the company in solving the problems of influencing the state of its property. All shareholders participate in the profits and losses of the company by means of reception of dividends and by the increment (or decrease) of share capital. The company pays dividends to shareholders after payment of expenses and payment of taxes. Payment of dividends depends completely on the position of the main shareholders of the company - they can cancel the payment, to reduce or increase the size of them.
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Ordinary shares share on the first-class shares, and growth stocks. First-class shares are shares of sustainable corporations, which for many years pay good dividends, as well as increase their size as income increases. The price of these shares has a long-term trend of slow growth, they are less susceptible to market downturns than others. Growth stocks are issued young companies with growth potential. The dividends on these shares are not paid, because all the profits go to the expansion of production. The prices of these shares have a tendency to rapid growth, but can also fall sharply. Typically, these shares are purchased by the investor, when he wants to achieve rapid increment of the capital.
Preference shares give the right to receive dividends in the first place. They are cumulative and convertible. Cumulative preference shares give the opportunity to receive dividends even in case, if the company suspends making them. In this case they will be accumulated until the company will not be able to fully them to pay. Convertible preferred shares may be exchanged for ordinary shares issued their company.
The mutual funds. This means, attracted by the investment companies for the purchase of shares, bonds and other securities. One of the most popular types of mutual funds are money market funds. They specialize in deposits short-term securities. Mutual funds are suitable small investors, as they do not have enough time and experience for the favorable investment.
Other types of securities investment options, financial futures and commodity futures.
The stock option is a contract that gives the holder the right to buy or sell a specific stock in a certain amount at a specified price and within a fixed period of time.
Financial futures contract is a contract that gives the legal right to purchase of financial instruments in the future.
Commodity futures contract is a contract, as prepared for future delivery of the goods.
