What are marketable securities? Basically, they are any financial instrument that is able to be purchased or sold by anyone so that anyone can sell or buy the security at the current market price. This means that the investor can benefit from the gain and loss of the underlying security while also being able to do anything with the security once it is purchased.
There are a few different things that determine the marketability of marketable securities for trading. They include the government backing, the credit rating of the issuing company, and the financial condition of the company. Basically, a marketable security will have to have three different factors in order to be issued into the trading environment. First, the company must be financially strong. In order for this to happen, there must be a sufficient number of long-term assets that the company can use as collateral for borrowing money in the future. Additionally, there needs to be a strong secondary market for these securities in order to encourage investors to purchase them.
The second factor is the credit rating of the issuing company. Basically, the rating of the company is what determines the value of the stock and allows investors to purchase or sell stock depending on their view of the company’s future success and performance. It basically goes hand in hand with the third component, which is the strength of the company’s balance sheet. In order for the marketable securities to be purchased by investors, there has to be enough assets that can be sold to create a line item transaction. Line item transactions are simply trades made by an investor and the buying and selling of the security occurring within one year of the transaction.
Once all three of these components are in place, then it is possible to determine the marketability of the security. However, the determination of its marketability actually depends on the individual company that it is issued by. A company may be marketable based on the state of the economy, the quality of their financial statements, or the overall health of the business as a whole. Some companies are put into a class of financial security and are then considered “over-insured”. This essentially means that they are protected in the event that they are unable to pay out claims from their own funds.
The third factor that impacts the marketability of marketable securities is the type of borrower that an investor has. There are two major types of borrowers when it comes to buying and selling short-term liquid securities: institutional and individual. Institutional buyers purchase marketable securities because they are required to diversify their investments in order to minimize their exposure to risk. On the flip side, individual investors purchase marketable securities in order to earn dividends or capital gains.
Institutional investors are generally banks and financial institutions. They purchase marketable securities in the open market with the intent of holding them until they mature and earn dividends. Once they do, they sell the remaining shares to individual investors. Typically, institutional investors will earn a higher rate of return on the money they invest than would an individual investor. Short-term investors typically purchase marketable securities in order to meet their retirement needs.
Lastly, some financial assets are categorized differently depending on their classifications as well as the location in which they are held. For instance, a particular financial asset may be held in a regulated market, such as a commodity market or a local area stock exchange (LANX), or it could be classified as an exempted market. Exempted markets differ from marketable securities in that they are exempt from the restrictions that apply to the open market. Examples of marketable securities that are considered exempt from market regulations include futures contracts and options, foreign exchange market products, and certain types of bonds. Holding a financial asset in an exempted market gives you flexibility in trading, but it does not give you the same degree of protection.
When it comes to investing, it is important to learn what marketable securities can give you the highest rate of return. You want to choose those instruments that are marketable at a reasonable price. You should also make sure you understand what a reasonable price means and how to spot a good deal. When you are ready to invest, you should make sure you have the cash you need to cover the risk and the investment you want to make. Never rush into a major purchase like this. Take your time and find the best way for you to invest and you will be rewarded when you do.
