Difference Between Securities and Stocks
In today’s business world, financial instruments such as securities and stocks play a pivotal role for corporations and governments, allowing them to get the necessary financing for expansion and growth purposes. While stocks and securities can be used interchangeably, it is better to understand the two separately for clarification purposes.
Security is an instrument which can be bought or sold in the secondary market. Stocks belong to that category as well but they are other investment opportunities which an individual can pursue such as bonds, mutual funds, options, derivatives etc.
The simplest way to differentiate stock from other forms of security is that it represents ownership of an individual in a corporation. When a company decides to go public, it issues shares or stocks to the general public which can be traded on stock exchanges such as New York Stock Exchange etc. Depending on the amount of stocks an individual has bought, the ownership gives the individual voting rights in a company and further allows him or her to earn income in the form of dividends.
Securities are therefore, further comprised of non-stock instruments and will most likely take the form of bonds. These bonds are usually issued by state owned entities (municipal bonds, saving bonds) which represent a debt obligation rather than ownership. In such a scenario the issuer of that bond has agreed to pay you your investment plus the interest amount.
The biggest difference between the two is the amount of risk involved. Stocks are considered riskier and volatile as compared to other securities. However, with higher risk, you may be able to generate higher amounts in return when investing in stocks. Therefore, it is always advisable to diversify your portfolio by including various types of securities in order to minimize the overall risk.
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Securities
Securities are financial instruments which represents ownership – equity securities such as stocks, a debt obligation or relationship with a state entity – debt securities such as debentures and bonds, or the right to ownership – derivative contracts such as options, forwards, swaps. The issuer is referred to the company issuing the security.
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Stock
It is type of security which represents one’s ownership or claim on assets of a corporation. The two types of stocks include common and preferred. The former gives an individual voting rights in a company, along with receiving dividends, while the latter gives the holder priority to a company’s asset in the event of liquidation or bankruptcy.
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 which represent a debt obligation rather than ownership. In such a scenario the issuer of that bond has agreed to pay you your investment plus the interest amount.
The biggest difference between the two is the amount of risk involved. Stocks are considered riskier and volatile as compared to other securities. However, with higher risk, you may be able to generate higher amounts in return when investing in stocks. Therefore, it is always advisable to diversify your portfolio by including various types of securities in order to minimize the overall risk.Next%20stop%3A%20Pinterest "Pin It")