What Are Securities?
3 min read · · Korean original
Hello, this is Bitpunk. In this post, we'll look at what securities are, the different types, and some investment examples.
Securities are transferable financial instruments issued by companies or governments. They can be traded on the market and include almost every kind of financial instrument. Sounds a little complicated? Types of securities include cash, stocks, bonds, mutual funds, checks, warrants, derivatives, debentures, gift certificates, and more.
For each of these securities, the legal entity that issues it becomes the issuer. Because of this, securities carry inherent risk. For example, stocks are usually considered riskier than bonds. Of course, some stocks are riskier than others.
Investors can choose the right securities based on the level of risk they prefer. Let's take a look at the following example.
Investment Example
Cheolsu bought 100 shares of Google stock. He did so because the company has a large market capitalization, the stock is highly liquid, and he could expect a high return on his investment. By acquiring Google shares, Cheolsu gains the right to receive dividends. So when Google announces its quarterly dividend next quarter, he will be paid the corresponding amount. Of course, the stock price could also fall, leaving him with an overall loss.
After buying the stock, Cheolsu decided to put 50% of his bank savings into government bonds. He chose bonds issued by the government as a product that carries less risk than stocks. When he buys the bonds, Cheolsu will receive an official certificate proving his ownership of them.
Securities in a Nutshell
Securities can be described as financial instruments issued by governments, institutions, or organizations to prove ownership. They have economic value in and of themselves, and they can also be used to prove ownership when profits are being distributed.
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