Security

    By
    sebkuhnert
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    A security is a financial instrument, such as stocks and shares or bonds, that can be traded on a stock exchange or at other markets.

    Securities fall into three main categories:

    1. Equity-based securities, such as shares and currencies.
    2. Debt-based securities, such as bonds and bank notes (because paper money carries a promise to pay the bearer).
    3. Derivatives, such as futures and options.

    The concept of securities is very close to the concept of asset classes, and in some cases, the terms are used synonymously.

    At tradimo, we try to give you information and support on online trading — independently of the securities or assets you want to trade.

    Because securities have a financial value, they represent ownership of the underlying assets. For example, holders of shares own a portion of the company that issued them. Bondholders invest in government debt, the value of the bonds indicating how much money they are owed, the interest rate and the time span, known as the maturity date.

    Securities vary enormously in scope — their worth depends on factors such as liquidity, both the country and currency they are issued in, how long they take to mature (for debt-based), market capitalisation (for equity-based), whether there are ownership rights of any sort or dividends may be payable, taxation issues such as capital gains and credit ratings (for bonds and related derivatives).

    Trading and investing in securities

    The decision to trade or invest in securities depends on the goal. Day traders usually buy and sell securities within short time frames, according to their chosen trading strategy. They often employ technical analysis to analyse the price movement and look out for opportunities. In doing so, they take on risk from other actors in the market.

    Investors usually buy securities to make money in the longer term. For example, shares issued by a company may rise in value from year to year as well as paying out a regular dividend, while bonds may have a long maturity date, such as 20 or 30 years. Of course, investors may sell sooner if market sentiment suggests it is the right action.