Marketable Securities
Candlefocus EditorInvestors typically turn to marketable securities when they require a safe and highly liquid asset that is quick to convert to cash if needed. Commonly traded marketable securities include stocks, mutual funds, government bonds, and Treasury bills.
Stocks, otherwise known as equity securities, are shares in a company that entitle their owners to a fractional ownership of that company and the associated dividends or earnings from the company. Companies list on public exchanges, such as the New York Stock Exchange, to make their shares available to the larger public and are regulated by the Securities and Exchange Commission (SEC).
Government bonds, also known as debt securities, are typically issued by national or supranational entities such as the U.S. government, the European Union, or the World Bank. These bonds are essentially loan agreements between the bond issuer and the bondholder and adhere to terms regarding maturity date, interest rate, and more.
Treasury bills (T-bills) are very short-term debt securities issued by the U.S. Treasury with maturities ranging from a few days to 52 weeks. They offer safety and liquidity advantages because they mature quickly and are highly liquid.
Money Market Instruments (MMIs) are government-backed securities that mature in less than a year. These include CDs (Certificates of Deposit), T-bills, and commercial paper. These are considered among the most liquid of all investments.
Investing in marketable securities can be a great way to add safety and liquidity to a financial portfolio. Investors can gain exposure to different kinds of assets, including stocks, bonds, and currencies, while mitigating risks associated with long-term investment. Additionally, investors can make quick and accurate decisions about buying and selling, reducing transaction costs and trading times. Overall, marketable securities are a broad group of assets and investments that are considered liquid and easily tradable. Not only do these securities provide a great way for investors to diversify their portfolios, but they also offer the potential for higher returns than those that can be gained through conventional savings accounts or certificates of deposits.