What are securities? Classification, types of investments

Simply put , ownership of securities gives the right (depending on the type of security) to receive part of the company’s profits and participate in its affairs, receive repayment of the debt with interest, etc.

Issuers of securities (that is, those who issue them) can be a state, a municipality, or an individual company (private or public).

Securities have certain properties:

• they are standardized;
• are subject to state registration;
• they can be bought and sold;
• they are traded on the stock exchange;
• the price of securities is determined at auction.

What are securities

A security (CS) is a document confirming property rights to any share of capital. And also for the distribution of profits that this capital brings. Securities are a special form of capital; they are valuable in themselves, because... can be transferred or sold as a commodity and bring profit to the owner.

Types of securities:

• stock;
• bonds;
• government bonds;
• checks;
• bills;
• certificates (deposit and savings);
• privatization papers;
• bills of lading;
• savings books;
• double warehouse receipts;
• pledge certificates;
• mortgages;
• investment shares;
• depository receipts.

The list may include other documents that are classified as valuable, in the manner prescribed by law.

Attention!

A security may or may not be in paper form. In the second case, it is issued in the form of an electronic entry in a special register.

Property rights to securities can be transferred to another owner along with the securities themselves.

Who and how are they produced?

The release of certain securities is called an issue. The one who issues them is the issuer. Purposes of the issue:

• obtaining or increasing initial capital;
• reorganization;
• increase in the amount of investment.

The main purpose of issuing various types of securities is to raise funds. They can be borrowed, or involved in the authorized capital.

Reference!

Shares attract funds from investors into authorized capital, i.e., a share of a company whose owners receive profits generated in the process of work. Such profits are called dividends.

Organizations of various legal forms have the right to issue documents. Joint-stock companies issue shares, bonds, checks, mortgages and bills.

Non-profit organizations and various companies issue bonds.

State and banking structures - bonds and certificates. Management companies offer shares to buyers. And carrier companies provide customers with bills of lading confirming the right to receive the cargo. Individuals also have the right to act as an issuer and issue bills.

Organizations can place documents issued by them on the market independently or using the services of intermediaries - underwriters.

What are the risks when trading on the stock market?

An investor, unlike a depositor, is not insured against loss of capital. Any security or asset may lose value. Therefore, the investor must be aware of the full responsibility for the decisions made and be prepared for any turns. By entering the stock market, each participant assumes the following risks:

1. Market . The stock exchange is dependent on both the economy and politics. Any event in the world of finance, both domestically and internationally, is reflected in quotes.
2. Broker bankruptcy . In reality, this situation cannot be called a dead end. The investor will not lose his securities, since they remain his property. But it will take time to resolve issues and transfer assets to another broker.

According to the law, the broker has no rights to investors' assets. But in order not to face the bankruptcy of a broker, carefully select an intermediary to represent your interests on the stock exchange. Give preference only to experienced and well-known companies.

You can become an investor only when there is no fear of losing capital. At the same time, there should be savings for everyday needs and unexpected expenses. Transactions on the stock market are not a casino or a lottery. Successful investing requires knowledge and understanding of the processes in which you will participate.

There is not a single investor who always receives only profit. Most stock market participants prefer to remain silent about losses or failed transactions. In addition, it makes no sense to count on instant millions in profits with a small initial capital.

Many novice stock market participants make losing trades. But if they persist in learning and are able to draw conclusions from their actions, then they gradually gain experience and achieve success. If you don’t have the time or desire to dive into investments, it’s better to entrust the capital to a management company, choose a strategy and just monitor the results.

Give your rating

about the author

Klavdiya Treskova - higher education with qualification “Economist”, with specializations “Economics and Management” and “Computer Technologies” at PSU. She worked in a bank in positions from operator to acting. Head of the Department for servicing private and corporate clients. Every year she successfully passed certifications, education and training in banking services. Total work experience in the bank is more than 15 years. [email protected]

Is this article useful? Not really

Help us find out how much this article helped you. If something is missing or the information is not accurate, please report it below in the comments or write to us by email

Key signs of attitude towards valuable assets

Additional definitions of securities reflect their key features that prove their relationship to valuable assets.

Signs of a Central Bank:

• a document proving property rights and presented to confirm this right;
• the paper is a standard document and has legal force;
• security is a form of capital. It is a commodity value and a kind of substitute for money.

The rights of the owner of securities are protected by the state. The circulation of documents and the procedure for their issuance or redemption are regulated by federal law.

Security concept

Economics defines commodity relations as the availability of goods and money. In the process of economic relations, the need arises for the transfer of funds. In world practice, there are two possibilities for the global transfer of funds:

• lending;
• release (issue) of securities.

In the securities market, documents act as objects of trade carried out by buyers (investors) and sellers (companies), as well as intermediaries (brokers).

Central Bank is a type of existence of capital that differs from other forms of its existence (commodity, productive, monetary). Paper can be transferred instead of capital and generate profit. Securities are themselves commodities.

Classification of securities

Central banks differ in who produced them and in their economic essence. Some types mean a contribution to the development of the organization, others mean a bank deposit. Any securities can make a profit.

Division by functionality:

• Shares. They determine the share that can be bought or sold. These are mainly stocks;
• Debt. Papers recording the fact of taking out a loan (debt). These include: shares, mortgages, bonds, certificates, bills;
• Derivatives. Instruments confirming the right to a transaction. These are options and futures.

According to the validity period and place of circulation, valuable documents are divided into:

• Commercial. They are designed for a short period of time and operate on the money market. These include bills of exchange and letters of credit;
• Stock. They are bought and sold on the stock market, valid for more than 12 months or indefinitely. These are stocks and bonds.

By validity period:

• Urgent. There are short-term (up to 1 year), medium-term (from 1 year to 5 years) and long-term (from 5 to 30-40 years);
• Indefinite. Their existence is not limited by duration.

Important!

Stock instruments are sold an unlimited number of times. Commercial – once.

According to the classification of types, securities are divided into:

• basic. Documents based on property rights to an asset. Can be primary or secondary. Primary – the securities themselves (shares, bills, bonds). Secondary – securities issued for primary securities. For example, depositary receipts;
• derivatives (derivative). It is a non-paper document that arises from changes in the price of the asset underlying the security. Derivatives include: options, swaps and various types of futures.

By form:

• documentary (paper). Issued in document form;
• undocumented (paperless). They do not have paper media.

By method of ownership:

• bearer (unregistered);
• personalized, issued for a specific person;
• order Can be used by the person indicated in the documents.

By type of release:

• emission. Appear in large batches (series). Subject to state registration without fail;
• non-emission. State registration is not carried out.

According to the presence of risk:

• risk-free. In practice, short-term government bonds;
• risky. Securities that are more susceptible to volatility (changes in value). Low-risk include government securities, medium-risk include corporate bonds. Shares are considered high-risk documents.

In addition, there are Russian or foreign Central Banks, as well as market and non-market asset options.

Primary and secondary stock assets

These markets provide the investor with the opportunity to earn financial profits. Moreover, investment profitability depends not only on how much money was invested, but also on the ability to analyze the current situation and look forward (economic knowledge).

Now let’s define what a primary and secondary stock asset are. So, the primary market is the market where issued securities end up. And they resell them on the secondary market.

By the way, there is a very interesting article about capital productivity. Don't miss it! Here you will learn more about the work of enterprises with funds and liquidity.

The main activity of the primary market is to create the necessary economic conditions for the placement of newly issued securities. As well as reducing inflation and attracting free assets. The task of the secondary is to maintain the liquidity of securities, that is, to direct the movement of capital and form the market price of the Central Bank.

The state and enterprises often support the liquidity of securities with funds

Main types of securities

Securities are the basis of global and Russian financial transactions. They are used for investing and mobilizing sources of financing. Let us consider the characteristics of the main types of securities.

Stock

A share is an issue-grade security that represents an investment in the capital of a joint-stock company. The share determines the owner’s rights to receive a share of the company’s profit, to participate in management and to part of the property in the event of liquidation of the JSC.

There are two types of shares: ordinary and preferred (prefs). Ordinary - fully consistent with the definition given above. Preferred ones do not give the owner the rights to manage the joint-stock company, but provide priority rights to receive dividends.

In the event of liquidation, preference holders receive payments first. Privileged documents are distributed by closed or open subscription.

The denomination of the Central Bank can be different, most often small.

Bonds

The paper belongs to the class of debt documents. Bonds are securities that mean that the buyer has provided the issuer with a certain amount of money. Within a certain period, the owner has the right to receive for the bond a set amount specified in the documentation and a percentage of the value of the bond.

Reference!

The income from a security is called interest or discount. Interest payments on coupon bonds are made once a quarter or twice a year.

Organizations issue registered or coupon bonds (to bearer). Interest-bearing or interest-free (for a specific product/service), as well as a limited area of ​​circulation or freely circulating. In practice, most bonds are coupon bonds.

Depending on the issuer, bonds are divided into municipal, state and securities from legal entities.

Government securities (OFZ) are reliable, because the state is the guarantor of payments, and the securities are backed by state property.

Municipal papers issued by regions, counties and cities are also reliable. Experts note their higher profitability compared to OFZ.

Commercial bonds issued by legal entities are the most profitable option. But with the level of profitability the level of risk increases.

Bill of exchange

Central Bank, fixing the obligation of the drawer to pay the owner of the bill a certain amount of money. Sight bills do not have a maturity date. Term bills specify a specific payment date or indicate a period after which the debt must be repaid.

Features of a bill as a debt obligation:

• abstractness. The bill is not tied to a specific transaction and exists as an independent document;
• indisputability. The holder of the bill is exempt from objections from the drawer;
• right to protest. If the debtor does not repay the debt, the holder of the bill can record the fact of violation in the notary's office.

The main issuers of bills are banking structures.

Depository receipts

Depository receipts are classified as secondary securities. This is a document confirming the placement of primary securities in banks. The cost of the receipt varies depending on the fluctuations of the primary securities.

Checks

A check is a piece of paper that records a debt obligation. The holder of the check is obliged to pay the drawer a certain amount of money. Most checks are issued by banks.

Mortgage

A mortgage is a document executed under the terms of an agreement. Most often - a mortgage loan. The mortgage document specifies the rights of the owner of the mortgaged property and the conditions of the pledge on the encumbered property.

Deposit (savings) certificate

Certificate is a document issued by a bank confirming the fact of depositing funds into a bank account. A savings certificate indicates the right of the depositor or his successor to receive the deposit and interest on it within a certain period.

Bills of exchange

A bill of exchange
is a security that certifies an unconditional monetary debt unilateral obligation of the drawer (bank) to pay a certain amount of money to the bill holder (owner of the bill) upon maturity. A bank bill is basically of a deposit nature, and is issued by the issuing bank on the basis of the client depositing a certain amount of funds with the bank. The legislative meaning of the term “bill” is enshrined in Part 2 of Art. 815 of the Civil Code of the Russian Federation. Commercial banks issue bills of exchange of the following types:

• promissory notes, which represent a unilateral, unconditional obligation of the bank to pay a certain amount specified in the bill within a specified period;
• bills of exchange for which payers indicate third parties - debtors or guarantors of the bank.

A bank bill can be registered or drawn out to bearer, and it is drawn up in national or foreign currency.
The bills issued by banks also differ in their yield: interest-bearing, discount and interest-free. The bill is used as:

• instrument of payment;
• collateral and means of payment for lending.

The relations of the parties to the bill of exchange are regulated by the Federal Law of March 11, 1997 No. 48-FZ “On bills of exchange and promissory notes”.

Properties of the Central Bank

Valuable documents have a number of properties:

• Appealability. Paper can act as a commodity or a means of payment;
• Availability. Possibility of buying and selling, legality of transactions;
• Seriality. The issuance of valuable documents is carried out in parts, in batches;
• Availability of standards. The security must appear in accordance with the law. Have certain information and degree of protection;
• Liquidity. Demand for a product leading to quick sales;
• Riskiness. The purchase of securities may result in income or loss of investment;
• Guarantee of fulfillment of obligations. If contractual obligations are violated, you can go to court;
• State recognition. Turnover on the territory of the country, suggesting the possibility of sale, purchase, donation, inheritance.

The given signs secure the right to acquire part of a company, a share of ownership of an organization or enterprise.

Properties such as liquidity or riskiness depend on the market situation that determines the value of the security at a given moment.

Functions of the Central Bank

Valuable documents perform the most important functions:

1. They are an indicator of the economic situation. A stable exchange rate and low volatility indicate a normal state of the economy.
2. Perform a distribution function. Capital distribution is carried out with the help of securities.
3. Temporarily mobilize financial resources scattered among small businesses and individuals.
4. Regulate cash flow.

In addition, banks, government agencies and commercial organizations use the Central Bank as a credit and settlement instrument.

Stocks and bods market

The securities market or stock market is a set of relations relating to the turnover of securities.

The market is represented by trading platforms from different countries. There are more than 50 of them, the largest ones being the London Stock Exchange, the New York Stock Exchange, and the Tokyo Stock Exchange. The Moscow and St. Petersburg stock exchanges operate in Russia.

Functions of the securities market:

• activation of entrepreneurship;
• mobilization of financial resources;
• private investment and savings;
• investments in business of credit funds.

Important!

An individual does not have direct access to the securities market. Buying/selling is possible only through intermediaries, brokers. Brokers can be specialized companies or banks.

The exchange does not carry out transactions; it is an intermediary, a guarantor of the fulfillment of contractual obligations of the parties involved in the transaction.

Stock exchange participants

Stock exchange participants are divided into professional and private.

There are 3 parties involved in securities transactions:

1. Issuers . Companies that issue and sell their own securities.
2. Investors . Individuals or companies that purchase the assets of issuers.
3. Professional participants . Individuals or companies whose activities are directly related to the exchange - brokers, dealers, banks, management companies, qualified investors.

Professional participants are required to obtain a license and follow the rules. Private investors do not need a license, but they cannot enter the market without the mediation of a professional.

Legislative regulation of the issue

The issue and circulation of securities in Russia are regulated by:

• Civil Code of the Russian Federation. Chapter 7 “Securities”.
• Federal Law No. 208-FZ “On Joint-Stock Companies” dated December 26, 1995
• Federal Law No. 39-FZ “On the Securities Market” dated April 22, 1996

In addition, the legal relations of professional exchange participants are regulated by other legal acts and various documents. The main set of rules affecting the market is the Federal Law “On the Securities Market”.

Securities Market Law

The law regulates the issue, circulation, purchase/sale of securities and other actions of market participants:

• the role of the Bank of the Russian Federation;
• requirements for professional participants;
• appeals;
• information support;
• rights and obligations of a broker and dealer.
• determines the register of the Central Bank.

The law protects novice investors and organizations by regulating the interaction of investors and brokerage companies.

How to trade on the stock exchange

To trade on the stock exchange, a private investor needs an intermediary - a broker or trustee who will conduct transactions with assets on behalf of the client. If an investor creates his own portfolio, he only gives orders to the broker what to buy or sell. If cooperation with a management company is chosen, decisions are made by it. In both the first and second cases, the owner of the securities is a private investor.

When concluding an agreement with a broker or management company, be sure to check whether he has a license from the Central Bank.

All transactions between stock market participants are recorded by a special registrar . This is a special company that maintains a register of personal accounts indicating the personal data of the owner of the asset. The register helps to conduct shareholder meetings and when calculating dividends. The registrar operates on the basis of a license from the Bank of Russia.

All purchased securities of the investor are stored in the depository. Each client has a special deposit account. The investor, thanks to the activities of the depository, always knows how many and what kind of securities are in his ownership. When conducting a sale, the depository acts as a guarantor that this particular client has the right and currently owns the asset.

You can check the legality of the registrar and depository on the Bank of Russia website using a special link.

Ledger

Accounting book is a document for recording securities held by an organization.

The book records:

• issuer of securities;
• nominal price of each type of valuable documents;
• cost at the time of purchase;
• details: number, series and other data;
• date of purchase/sale;
• number of copies purchased.

According to the law, the accounting book can be kept electronically, provided that current data is printed at least once a year.

How to use securities

If you decide to try your hand at the stock market, you need to understand the options for activities related to valuable assets:

• investments (investments) of savings for the purpose of capital accumulation;
• purchase/sale of securities. Earnings based on the difference in purchase and sale prices;
• business.

The choice of one type of activity or another depends on the goals of the market participant and the size of the investment.

Investments

The initial capital can be increased through investment. The main investor instruments are stocks and bonds. As a rule, investing in securities is more profitable than placing capital in a bank account. Investor profit consists of two components:

• interest or dividends on bonds/stocks;
• increase in paper prices. After some time, it can be sold at a price higher than the purchase price.

Mostly long-term instruments are used for investment. The investor is not interested in price fluctuations, but in stocks and bonds that will rise in price and outpace inflation.

Speculation

Trading or speculation is a type of income based on the difference between the price of acquisition and sale of assets.

A trader differs from an investor in that he relies on short-term projects. They bring great profits, but the risk of projects is much higher than long-term ones.

Types of transactions

There are two types of transactions in the stock market:

• for long-term storage - buy and keep;
• for speculation – purchase and sale of assets based on the fall and rise in the price of the asset.

In addition, transactions on the exchange are divided into several types according to the execution mechanism:

• cash spot transactions with payment within a minimum period;
• without cover;
• on credit, also called margin or “leveraged”;
• arbitration;
• urgent;
• fixed price or firm deals;
• futures;
• with floating cost;
• optional;
• prolongation.

By type of execution, transactions can be either immediate or deferred. If a private investor conducts a transaction on the Moscow Exchange, the “T+2” execution mode means that the actual operation will take place in 2 business days. This is convenient for some investors, since even if there are not enough funds in the account at the moment, he can have time to report them before the transaction is carried out.