Securities refer to financial instruments that are traded in financial markets. Securities can be divided into two main categories: debt securities and equity securities.
Debt securities are also known as fixed-income securities and include instruments such as bonds, debentures, and notes. Debt securities represent a loan made by the investor to the issuer and provide a fixed rate of return to the investor in the form of interest payments. Debt securities are generally considered less risky than equity securities but offer lower potential returns.
Equity securities, on the other hand, represent ownership in a company and include instruments such as stocks, shares, and equity mutual funds. Equity securities provide investors with the opportunity to share in the company’s profits in the form of dividends or capital appreciation. Equity securities are generally considered riskier than debt securities but offer higher potential returns.