Question

What are the four major categories of securities? How are they evaluated?

EXPLANATION ?
Please list and describe what the four major securities are, and indicate under what circumstances you would want to invest in each.

THANKS?

Answer 1

Before discussing about the major categories we should know what is the meaning of securities- securities are the financial instrument that are traded in a financial market and hold some characterstics to generate capital or monetory value within some period of time.

The 4 major categories of securities are - cash,stocks,bonds, and mutual funds.

1.CASH- cash investment securities is the highly liquid security which means can be easily converted into cash,these investments are done for a short period of time.it contains low risk and results in low return as well. examples -Treasury bills, bank certificates of deposit, corporate commercial paper.

2.STOCKS- stocks are the investment securities with high risk as well as high return as a reward.The return on such securities are not fixed but keeps on fluctuating.It indicate certain ownership and are easily transferable.It helps in diversification of money and use of money that is kept ideal with you.it helps in aquiring a part in a company and getting benefits from its profit.Investor also get a chance in decision making of the company.

3.BONDS- bonds are the investment securities which includes fixed return as these indicates the loan that a company took from a investor,the bondholder contains certain priority over the owners(shareholder) as these are the debt of the company.The risk in such securities are low in comparision to stocks.bonds are liquid as well but less than stocks.bonds offers a stability to the investor.

4. MUTUAL FUNDS- mutual funds are the investment securities where the investor gives his money to the mutual fund company where the experts of the company invests their money accordingly in different securities for return. The company offers many types of mutual funds and the investor can take the decision according to his needs.These funds are reedemable and have low risk compare to stocks.These securities are affordable and helps in savings of a person.

CIRCUMSTANCES IN WHICH I WOULD LIKE TO INVEST IN EACH SECURITY IS AS FOLLOWS:

Cash- in circumstances where i don't want to take much risk and want money on regular basis than i will invest in these securities.as these can easily converted into cash and helps in temporary allocation of my money.

Stocks- if i am good in research of financial market and i want to take high return on securities and ready to take risks.if i want to be a part of a company and have access to the profits or if i want to trade in securities and i also want to divesify my money.

Bonds- if i want a fixed return on my investments and don't want to take much risk i would llike to invest in such securities.there are varities of bonds available such as goverment bonds which offer certain type of stability to the investor andd the investor act as a creditor to the company.

Mutual funds- If i am not good in research and understanding of financial market i would like to invest in such securities as the experts in such commpanies take the decision of investment of our money.if i want to take low risk and want certain transperancy of my money.it will also offers choices in investment according to the needs.

I HOPE THIS WILL HELP YOU!!!!