Any financier, even if he is a beginner, is required to understand all existing types of securities. Such information will help, first of all, to choose the best financial instrument for a securities holder who has certain goals.
Basic concepts
A security is a document of a standard form, which serves as a confirmation of the property rights of its owner. This is precisely what essentially lies in its essence. Recently, there has been a tendency to store papers exclusively in non-documentary form, which replaced the previous paper, with specific protection from creating fakes and copying.
In the securities market, transactions with monetary funds of the Central Bank are implied.
The following classification of securities is known:
- By their role in the formation of the authorized capital, they distinguish capital (investment, equity), which are issued for the formation or increase of capital of the company (stock), and debt, which are needed to borrow funds (financial bills, bonds, savings and certificates of deposit).
- On the basis of the issuer, they are divided into securities of legal entities and government. The issue of government securities is carried out by the federal government, municipal authorities, as well as individual government agencies. Securities of legal entities are issued by joint-stock companies, corporations, commercial banks, etc.
- They can be long-term and short-term in life.
- At the place of functioning, securities of the money market and capital market are distinguished.
- Allocate registered securities and bearer on the basis of designation.
Classification
One of the approaches in the classification is to divide them into two varieties, depending on the method of raising capital:
- equity securities, that is, providing a share to its owner in the authorized capital (thanks to them financial investments are made);
- debt, that is, being one of the methods of borrowing financial resources.
What securities are equity securities?
We will understand what applies to equity securities. They are a tool that secures to its owner a certain part of the property of the issuing company. By purchasing such a security, a person has the right to claim part of the company's profit, take part in its management or have a share of the property in the event of the liquidation of this enterprise.
How not to mix up equity and debt securities? The former form a person’s own capital, and the latter form a borrowed company capital.
Thanks to equity securities, it is possible to make the procedure for the turnover of property more convenient and efficient. In addition, their use can help attract many investors if they want to realize themselves in the framework of a particular business project.
Equity securities are generally considered to be those that indicate that their owner has contributed a specific part to a certain total capital.
Main types
What is their number?
A share is one of the representatives of equity securities, through the use of which the owner, or the so-called shareholder, has his share in the company and actually becomes a co-owner. Thanks to the shares, you can receive the right to profit in the form of dividends, as well as take part in the management of the company. If the investor acquired them, then he is included in the register of shareholders. It should be noted that when buying shares, he has certain risks. If the company's business is negative, the value of the shares will suffer. It will decrease, as a result of which the investor may lose partially or fully invested money.
Thus, in equity securities, the shares are the property of the issuing company, and any of them is a certain part of this share. Existing varieties of stocks are discussed below.
Ordinary shares
Their owners gain the right to vote and can use it at a stock meeting. However, they are less privileged in making a profit. It is also possible at the meeting to decide on the direction of dividends to further expand the scale of production, in connection with which those who hold shares will not make a profit at all. Moreover, the joint-stock company has a legal right to this.
Despite all the shortcomings, common stocks still remain a fairly popular investment method. They are acquired by many private investors and various financial institutions.
Privileged
Holders of preferred shares do not have a voting right, but they have a privileged right to receive dividends due to them. If the latter are not paid by the joint-stock company, the owners of this type of shares acquire the voting right. Typically, preferred shareholders pay dividends lower than ordinary ones; they are also inexpensive. Their attractiveness for investment is that dividends are paid regularly. Most often those people who are interested mainly in providing a normal income at present, and not in getting the highest profit, invest in stocks.
The exchange circulation of shares provides certain benefits to almost everyone, including issuing companies. The equity market is more developed.
Profit
By investing financial resources, shareholders receive a profit in the form of dividends, as well as in the form of increased value of their shares. At the same time, issuers have additional funds that can be invested in the implementation of their own internal projects. In addition, you also need to take care of the interest payment.
Types of equity securities are of interest to many. We list them below.
So, the stock is such a security, thanks to which the investor-shareholder who acquired it receives a certain profit. At the same time, incomes can be both high and even small, since the stock market rate is constantly fluctuating. With the rapid growth of the company, the investor can sell it more expensive and gain a fairly large amount. At the same time, in a crisis situation, the stock exchange rate will fall, and the investor will suffer losses. In this regard, the overwhelming number of shareholders is connected with the shares of large and stable companies with a tendency to further growth.
As another variety of equity securities are stock units. An investment fund is the holder of another large investment portfolio. The management company strictly monitors the securities included in the portfolio. At the same time, a stock share, like a stock, allows the owner to receive a certain income and have a share of the fund’s assets. To minimize their own losses, investors primarily create a portfolio of debt and equity securities.
conclusions
So, now we know that distinguish between equity and debt securities. You must know about these varieties, if only because each of them has its own special capabilities and different types of income. Sometimes, for a competent person who makes the right investments, asset transactions are already the sole source of income.
Currently, the securities market in Russia is also developing very rapidly, as a result of which increased interest in this topic is expected to continue.
In this case, the main task of the investor should be the analysis of the asset's return. But to make an investment portfolio of good quality is possible only after obtaining permission using analytics of companies that are managers.