What are Securities – Examples, Types, How to Trade Securities (2024)

Securities offer investors one of the best ways to grow their capital. However, there are many different types of securities available for investors; which means learning what securities are and how they work is hugely important to be a successful investor.

Securities represent the most common investment contracts. Whether saving for retirement or seeking short-term opportunities, most people choose to put a portion of their investments into securities. These securities markets are also important for the economy, asthey allow companies to raise capital from the public.

There is quite a bit you should know before you dive in. If you wantto invest in securities right away, here is a quick guide.

Getting Started with Securities - Quick Guide

  • Select yoursecurities–You can choose from stocks, bonds, and other financial instruments that hold value and can be bought, sold, and traded.
  • Decide your strategy- trading lets you speculate on the price movement; dealing lets you take direct ownership of the securities.
  • Take your positioncreate an accountwith us to gain access to more than 7,000securities.

What are Securities?

Securities in finance refer to fungible, negotiable,and tradable financial instrumentsthat hold some type of monetary value. Security can represent ownership in a corporation in the form of stock, a creditor relationship with a governmental body or a corporation represented by owning that entity's bond; or rights to ownership as represented by anoption.

Although the term "securities" is commonly associated with stocks, bonds, and similar instruments, according to US laws, an investment can be regulated as a security if:

  • There is an investment of money.
  • The investment is made into a "common enterprise."
  • The investors expect to make a profit from their investment.

Any expected profits or returns are due to the actions of a third party or promoter.

Under this rule, it does not matter if a securities offering is formalized with a legal contract or stock certificates; any type of investment offering can be a security.

What are the types of securities?

In most jurisdictions, the term broadly covers all traded financial assets and breaks such assets down into three primary categories:

Equity securities – which includes stocksDebt securities – which includes bonds and banknotesDerivatives – which include optionsandfutures

1. Equity securities

Equity almost always refers to stocks and a share of ownership in a company (which is possessed by the shareholder). Equity securities usually generate regular earnings for shareholders in the form ofdividends. Equity security does, however, rise and fall in value in accord with the financial markets and the company’s fortunes.

If you have an aggressive outlook and a high-risk tolerance, equities are the go-to asset class. They can help you build adequate funds for different life goals, especially long-term ones, and ensure you address them with ease.

How Can You Invest in Equity Securities?

You can invest in this asset class in two ways: direct investment through stocks and investment via mutual funds.

Direct investments through stocks: If you wish to invest in equities directly through stocks like Tesla or Apple, you need to open a trading account. A trading account is a place to buy and sell orders with your stockbroker through a stock trading platform. See the latest ranking with the best stocks to buy now.Investments through stock funds: Over the years,exchange-traded fundshave emerged as one of the most popular financial instruments to build a corpus for different life goals. See the best ETFs for 2024.

Why Invest in EquitySecurities?

Now that you know what equity securities are and the ways to invest in them, let’s understand the various benefits that equity investment brings to the table. Some potential benefits are:

Inflation-beating Returns
With time, inflation brings down the value of money. For long-term goals such as children’s education and retirement, you need to invest in an asset class that has the potential to trounce inflation. Investing in equities can help you do so as they can generate inflation-beating returns in the long run.
Capital Appreciation
Investing in equities can appreciate your principal capital by a significant margin. If you invest in an equity share of a fundamentally sound company, its price, likely, will appreciate with time. You can benefit from this capital appreciation.
While most equity securities usually do not entitle their holders to periodic payments, some do, and these payments are calleddividends. These payments arrive even if the stock has lost value and represent income on top of any profits that come from eventually selling the stock.

2. Debt securities

Debt securities differ from equity securities in an important way; they involve borrowed money and the selling of a security. They are issued by an individual, company, or government and sold to another party for a certain amount, with a promise of repayment plus interest. They include a fixed amount (that must be repaid), a specified rate of interest, and a maturity date (the date when the total amount of the security must be paid by).

Bonds, bank notes (or promissory notes), andTreasury notesare all examples of debt securities. They all are agreements made between two parties for an amount to be borrowed and paid back – with interest – at a previously established time.

How Can You Invest in Debt Securities?

You can invest in this asset class in two ways: direct investment through stocks and investment via mutual funds.

Direct investments through bonds
You can trade bonds through most brokers just like you wouldtradestocksorindexes.The most popular bonds for retail investors are government-issued bonds in US, UK, or Germany, such as US30YTreasuryBonds30Y, US10Y Treasury Notes, UK10YGilts, and German10YBund.
Investments through bond funds
Bond exchange-traded funds(ETFs) are a type of exchange-traded fund (ETF) that exclusively invests in bonds and give your portfolio the opportunity to earn income from interest payments—unlike stock ETFs, which aim for long-term returns.

Why Invest in Debt Securities?

There are many benefits to investing in debt securities.

Return on capital
Investors purchase debt securities to earn a return on their capital. Debt securities, such as bonds, are designed to reward investors with interest and the repayment of capital at maturity. The repayment of capital depends on the ability of the issuer to meet their promises – failure to do so will lead to consequences for the issuer.
A regular stream of income from interest payments
Interest payments associated with debt securities also provide investors with a regular stream of income throughout the year. They are guaranteed, promised payments, which can assist with the investor’s cash flow needs.
Means for diversification
Depending on the strategy of the investor, debt securities can also act to diversify their portfolio. In contrast to high-risk equity, investors can use such financial instruments to manage the risk of their portfolios. They can also stagger the maturity dates of multiple debt securities ranging from short-term to long-term. It allows investors to tailor their portfolios to meet future needs.

3. Derivatives

A derivative is a contract between two or more parties that derives its value from the price of an underlying asset, like acommodity. Financial derivatives instruments are often used to speculate on the underlying’s spot or future price movements, whether up or down, without having to own the asset itself.

A derivative often derives its value from commodities such as gas or precious metals such as gold and silver. Currencies are another underlying asset a derivative can be structured on, as well as interest rates, Treasury notes, bonds, indices, cryptocurrencies, forex, and stocks.

How do you trade derivatives?

Derivatives can be tradedover the counter (OTC)oron exchange:

Over-the-counter (OTC)
OTC securities are traded without being listed on an exchange. Securities that are traded over the counter may be facilitated by a dealer or broker specializing in OTC markets. OTC trading helps promote equity and financial instruments that would otherwise be unavailable to investors.
An exchange-traded derivative is a financial contract that is listed and traded on a regulated exchange. These arederivativesthat are traded in a regulated environment. Futures and options are two of the most popular exchange-traded derivatives.

When trading with us, you’ll be taking a position on derivatives using CFDs. This means that instead of dealing on exchanges – which can be difficult and costly – you’ll be speculating on price movements exclusively.

Why Trade Derivatives?

The reason for investing in equity derivatives tends to fall into four reasons:

Thisis a common, but risky, market activity for financial market participants of a financial market takes part in. Speculators take an educated gamble by either buying or selling an asset with the expectation of short-term gains. It is risky because the trade can move against the speculator just as quickly, resulting in potentially significant losses. As an inexpensive and highly liquid way to gain exposure to an asset without necessarily owning that asset, derivatives are a very important part of the arsenal for financial market speculators.
Margin trading
In finance terms,the marginis the collateral deposited by an investor with their broker or the exchange borrows money to leverage their investment power. By employingleverage, a trader can magnify gains but also may suffer larger losses. Equity derivatives are often used by margin traders, especially when it comes to stock indexes since it would be incredibly capital-intensive to fund purchases of every single stock that comprises the index basket.
Hedgers use financial equity derivatives to reduce their existing risk or future exposure. An example might be an equity fund manager who wants to protect theirdownside riskon securities that they own but might not want to sell that security now. In this way, you can mitigate your risk by gaining some profit and limit your losses overall, without having to liquidate an investment portfolio.
Arbitrage isthe condition under which two equivalent assets or derivatives, or a combination of assets and derivatives sell for different prices. This allows an arbitrageur to buy at a low price and sell at a high price and earn a risk-free profit from this transaction without committing any capital.
Trading rising and falling markets
With derivatives, you can trade both rising and falling markets, meaning you can profit (or make a loss) even in a bear market or volatile economic environment. You’d go ‘long’ if you think the price of an underlying asset will rise; and ‘short’ if you think it’s going to fall. To open a long position, you’d elect to ‘buy’ the market. Whengoing short, you ‘sell’ the market when opening your trade.

4. Other securities

Some classifications also include hybrid securities as a major category. Hybrid securities combine some of the characteristics of both debt and equity securities, such asequity warrants(options issued by the company itself that give shareholders the right to purchase stock within a certain timeframe and at a specific price),convertible bonds(bonds that can be converted into shares of common stock in the issuing company), andpreference shares(company stocks whose payments of interest, dividends, or other returns of capital can be prioritized over those of other stockholders).

Dealing vs trading securities: the differences in detail

While the terms are often used interchangeably, there’s a significant difference between ‘securities dealing’ and ‘securities trading’.

When trading via CFDs, you speculate on rising and falling prices without ever owning the securities. You can make a profit if you correctly predict the direction of the market, but you’ll incur a loss if it moves against you.

Trading securities with CAPEX.com

  • Low margins: Gain full exposure from 5% of the position size with our low margins
  • Low trading costs: Spreads starting from 0 pips and commission zero for most of the assets
  • 2,100+ securities to trade: Get exposure to a wide range of CFDs on stocks, indices, forex, commodities, bonds, or cryptocurrencies
  • Negative balance protection: Ensures that traders do not lose more than the balance on their account – even if the market moves quickly or gaps.

When investing via a traditional dealing account, you’ll buy securities outright – this gives you ownership rights. You’ll only profit if you sell the securities at a higher price, but you could also receive dividend payments or interest.

Dealing securities with CAPEX.com

  • Low dealing costs: Zero commission on shares (terms and conditions apply)
  • Huge choice of securities: Invest in over 5,000+ shares and ETFs listed on 10 major exchanges


  • Securities are fungible and tradable financial instruments used to raise capital in public and private markets.
  • There are primarily three types of securities: equity—which provides ownership rights to holders; debt—essentially loans repaid with periodic payments; and derivatives— financial contracts whose value is dependent on anunderlying asset, group of assets, or benchmark
  • With CAPEX.com you can buy and sell over 5,000 securities with ownership (stocks and ETFs) or trade over 2,100 on the most popular securities in the world through CFDs.

Free Resources

Before you start trading securities, you should consider using the educational resources we offer likeCAPEX Academyor ademo trading account. CAPEX Academy has lots offree trading coursesfor you to choose from, and they all tackle a different financial concept or process – like the basics of analyses – to help you to become a better trader or make more informed investment decisions.

Our demo account is a suitable place for you to learn more about derivatives trading, and you’ll be able to get an intimate understanding of how trading and investing work – as well as what it’s like to trade with leverage – before risking real capital. For this reason, a demo account with us is a great tool for investors who are looking to make a transition to leveraged securities.

To make better-informed trading decisions, consider the following market outlooks:

EURUSD forecast and price predictionTurkish Lira forecast and price predictionGold forecast and price prediction
Oil forecast and price predictionDow Jones forecast and price predictionNatural Gas forecast and price prediction
Silver forecast and price predictionBritish pound forecast and price predictionNasdaq forecast and price prediction

FAQs about Securities

What are Securities – Examples, Types, How to Trade Securities (1)What are Securities – Examples, Types, How to Trade Securities (2)

Cristian Cochintu


Cristian Cochintu writes about trading and investing for CAPEX.com. Cristian has more than 15 years of brokerage, freelance, and in-house experience writing for financial institutions and coaching financial writers.

Cristian Cochintu writes about trading and investing for CAPEX.com. Cristian has more than 15 years of brokerage, freelance, and in-house experience writing for financial institutions and coaching financial writers.

As a seasoned financial expert with over a decade of experience in brokerage, freelance writing, and in-house financial writing for institutions, I bring a wealth of knowledge to the table. My expertise encompasses a broad range of financial instruments, including securities, which are a crucial aspect of investment portfolios. Now, let's delve into the key concepts outlined in the article.

Securities Overview: Securities are fungible, negotiable, and tradable financial instruments representing ownership, creditor relationships, or rights to ownership. These instruments play a pivotal role in capital markets, allowing individuals and companies to invest and raise capital.

Types of Securities:

  1. Equity Securities:

    • Definition: Represented by stocks, equity securities signify ownership in a company.
    • Characteristics: Generate dividends, subject to market fluctuations.
    • Investment Options: Direct investment in stocks or through exchange-traded funds (ETFs).
    • Benefits: Inflation-beating returns, capital appreciation, and potential dividend income.
  2. Debt Securities:

    • Definition: Involves borrowed money, such as bonds, with a promise of repayment plus interest.
    • Investment Options: Direct investment in bonds or investment through bond funds (ETFs).
    • Benefits: Return on capital, regular income from interest payments, and a means for portfolio diversification.
  3. Derivatives:

    • Definition: Contracts deriving value from the price of an underlying asset.
    • Underlying Assets: Commodities, currencies, interest rates, and stocks.
    • Trading Options: Over-the-counter (OTC) or on-exchange, with a focus on Contracts for Difference (CFDs).
    • Reasons for Trading: Speculation, margin trading, hedging, and arbitrage.
  4. Other Securities:

    • Hybrid Securities: Combine characteristics of both debt and equity, including equity warrants, convertible bonds, and preference shares.

Dealing vs. Trading Securities: While the terms are often used interchangeably, there's a crucial difference between securities dealing and securities trading.

  • Securities Dealing:

    • Ownership: Involves buying securities outright, providing ownership rights.
    • Profit Source: Profits realized upon selling securities at a higher price or through dividends/interest.
    • Platform: Traditional dealing accounts.
  • Securities Trading:

    • Ownership: Involves speculating on price movements without owning the securities.
    • Profit Source: Gained by correctly predicting market directions.
    • Platform: Commonly executed through Contracts for Difference (CFDs).

CAPEX.com Trading Options:

  • Equity Trading: Over 5,000 securities available for outright ownership or trading through CFDs.
  • Low Margins and Costs: Access to a wide range of securities with low margins and trading costs.
  • Educational Resources: Utilize resources like CAPEX Academy and demo trading accounts for skill enhancement.

Conclusion: Securities, spanning equity, debt, derivatives, and hybrids, form the foundation of investment portfolios. Understanding the distinctions between dealing and trading, as well as leveraging the diverse range of securities, empowers investors to make informed decisions. CAPEX.com provides a comprehensive platform for both traditional dealing and CFD-based trading, accompanied by educational resources for skill development and risk-free exploration through demo accounts.

What are Securities – Examples, Types, How to Trade Securities (2024)
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