What is Marketable Securities?

395 reads · Last updated: December 5, 2024

Tradable securities refer to securities that can be transferred or sold at any time, such as stocks, bonds, and short-term bonds. Tradable securities usually have high liquidity, and investors can obtain cash or make other investments by selling these securities. The value of tradable securities usually fluctuates with changes in market supply and demand and market expectations.

Definition

Marketable securities are financial instruments that can be easily transferred or sold, such as stocks, bonds, and short-term debt instruments. They typically have high liquidity, allowing investors to convert them into cash or other investments. The value of marketable securities often fluctuates with changes in market supply and demand and market expectations.

Origin

The concept of marketable securities originated with the development of financial markets, particularly in the late 19th and early 20th centuries. As stock and bond markets matured, the increasing demand for liquidity among investors led to the widespread adoption of marketable securities.

Categories and Features

Marketable securities are primarily categorized into stocks, bonds, and short-term debt instruments. Stocks represent ownership in a company, typically offering high liquidity and high risk; bonds are debt instruments issued by companies or governments, offering lower liquidity and risk compared to stocks; short-term debt instruments like Treasury bills have short maturities, high liquidity, and low risk.

Case Studies

Case Study 1: Apple Inc.'s stock is a typical marketable security, which investors can buy and sell on the NASDAQ market. Its price is significantly influenced by market supply and demand and the company's performance. Case Study 2: U.S. Treasury bonds are another type of marketable security, which investors can trade in the secondary market and are generally considered low-risk investments.

Common Issues

Common issues investors face with marketable securities include price risk due to market volatility and the potential for frequent trading due to high liquidity. A common misconception is that all marketable securities carry the same risk, whereas different types of securities have varying risk and return characteristics.

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