Why choose equities?

You can trade shares on stock markets such as the New York Stock Exchange (NYSE) and Nasdaq — they have high liquidity and can be easily bought and sold.

Debt securities

Debt securities include bonds, treasury securities, and corporate debt obligations. Any debt security is a loan — businesses or governments borrow money from investors, who, in their turn, get regular payments of interest (also called coupon payments) and principal repayment upon an agreed maturity date.

What are the types of debt securities?

• Bonds are long-term debt instruments that typically mature in more than 1 year.

• Treasury bills (T-bills) are short-term government securities (they usually mature in less than 1 year).

• Commercial papers are short-term corporate debts (their maturity date is usually up to 270 days). For instance, Tesla, Inc. issues bonds.

• Municipal bonds are loans issued by cities or states to fund public projects (for example, New York City municipal bonds).

Why choose debt securities?

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Derivatives

Derivatives are financial instruments whose value depends on the value of an underlying asset such as stocks, bonds, commodities, currencies or interest rates. Derivatives include:

• Options — they give an investor the right (but not obligation) to buy or sell an asset at a set price.

• Future contracts (or simply futures) — obligations to buy or sell an asset at a predetermined price at a future date.

• Swaps — agreements to exchange cash flows (for example, interest rate swaps).

Why buy derivatives?

Derivatives can be a useful tool in your portfolio. They allow traders to speculate on price changes, hedge against risk, and take advantage of positions with little capital investment to get strategic trading opportunities. For example, to speculate on or hedge market movements, look into S&P 500 futures. Note that they provide no direct ownership of the underlying asset.

Hybrid securitiesh

Hybrid securities combine elements of both debt and equity securities — they can pay regular income like bonds but may also convert into shares under certain conditions. It’s a compromise between risk and return for those investors who seek higher profits but are risk-cautious. Hybrids include:

• Convertible bonds — bonds that can convert into a predetermined number of shares on agreed terms.

• Perpetual bonds — come with no maturity date and often pay fixed interest forever.

• Preferred shares — can also be considered equities, as stated above.

Why choose hybrid securities?

Check our comparative chart of securities and choose what you need.

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Regulatory framework and compliance

Securities regulation is designed to protect investors from fraud, ensure fair, transparent, and efficient markets, and maintain financial stability for all players involved.

It is important for both traders and investors to understand the regulatory demands and restrictions that apply to securities. In the U.S. the securities market is regulated by the Securities and Exchange Commission (SEC); in Europe — by the European Securities and Markets Authority (ESMA). The regulation rules may vary across locations, but they pursue the same objectives:

• to make sure that companies provide full, accurate, and timely information such as repayment terms, risks, and financial health;

• to exclude the possibility of insider trading and market manipulation; and

• to prevent excessive speculation.

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Securities vs. alternative investments

It’s also important to distinguish securities from other investments like real estate, commodities, and direct investment. While these alternative assets might be useful for diversifying your portfolio, they do fall into the conventional definition of securities.

Alternative investments include:

• real estate — residential or commercial property;

• private equity — ownership in private companies;

• hedge funds — pooled funds requiring advanced strategies;

• commodities – gold, platinum, oil, etc;

• cryptocurrencies – Bitcoin, Ethereum, etc;

• collectibles — for example, pieces of art.

Contrary to publicly traded securities, they have:

• lower liquidity;

• limited regulation;

• less transparency;

• potential for higher returns and higher risk.

Summary

To make well-weighed financial decisions, it’s important to understand what kind of investments fall within the category of securities, and how each of these categories work. Combining this knowledge with experience in the never-static markets is a key to long-term economic prosperity.

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