Marketable securities are easily convertible to cash and can be sold on the secondary investment market. They are classified as debt or equity securities, with stocks and bonds being the most commonly traded. Preferred stocks offer regular dividend payments, while bonds are sold by corporations and governments to raise money for short-term projects. Bank-issued certificates of deposit are generally not marketable.
Marketable securities are a type of marketable investment that can be quickly converted into cash. Investors can sell marketable securities on the secondary investment market. While many investors like the liquidity these investment instruments provide, some people hold onto marketable securities for decades. Marketable securities are classified as either debt securities or equity securities, but not all types of debt securities and equity securities are marketable.
Stock represents an ownership interest in a corporation and is a commonly traded type of marketable equity security. Publicly traded companies issue shares during initial public offerings, and shareholders can later sell those shares on the secondary market. Expanding companies periodically issue more shares to raise funds for mergers and acquisitions. The price of shares fluctuates based on supply and demand, so although holders of shares may convert shares into cash at any time, the sale price may not equal the original purchase price. Investors hold shares in brokerage accounts and pay a trading fee to a stockbroker who sells the shares on the investor’s behalf.
Preferred shares are another type of tradable equity instrument. Someone who owns preferred stock has an ownership interest in the company that issued the stock, but preferred stock holders, unlike common stockholders, do not have voting rights. Investors who own preferred stock receive regular dividend payments, and these payments allow preferred stock prices to remain more stable than common stock prices. Preferred stock, like common stock, is generally held in brokerage accounts. Investors may sell the shares during regular business hours of the market on which the shares are traded.
Bonds are the most commonly known tradable debt securities. Corporations and governments sell bonds to raise money for short-term projects. Bondholders are actually creditors who receive a return of the premium along with interest if the bonds are held to maturity. Many investors choose to sell bonds in the secondary market before maturity. The price a bondholder receives can vary from the purchase price of the bond, and some investors who need cash fast even sell bonds for a discount.
Bank-issued certificates of deposit (CDs) are sometimes issued as marketable securities, but CDs are generally not marketable, and the original purchaser holds the CD until maturity. Marketable CDs are sold to brokerage firms that sell the CDs as a conservative alternative to bonds. Banks issue certificates of deposit to raise money to issue loans, and most certificates of deposit are non-tradable to prevent creditors from prematurely borrowing before banks have raised enough funds through originating loans to pay off the debt. debt. Some government bonds are also not marketable, and the original purchaser or the original purchaser’s estate must redeem the bond at maturity.
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