Securities are financial instruments that hold monetary value and is traded in the public market.

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They represent a clear proof of a person’s ownership in a stock or bond. Securities are divided mainly in to two, i.e. equities and debts.

Any type of security that represent ownership of the investor in any entity such as firm, company, trust etc. is called an equity security.

Those having these types of securities may not receive regular payments, but can gain profits when they sell these securities when the market is favourable.

In addition, these securities also provide the investor with certain amount of rights in invested firm.

A debt security on the other hand is the representative of the cash that has to be repaid to the investor by the entity.

This could be any entity such as government bond, collateralised securities among others.

Issued generally for a fixed period, they provide regular payments to the owner during the stipulated period at the end of which they can redeem it.

Similarly, there could also be hybrid securities that come with a mixed package showing characteristics of both equity and debt securities.

First Published:Jul 5, 2018 6:01 PM IST