According to investopedia security is “a financial instrument that represents: an ownership position in a publicly-traded corporation (stock), a creditor relationship with governmental body or a corporation (bond), or rights to ownership as represented by an option. A security is a fungible, negotiable financial instrument that represents some type of financial value. The company or entity that issues the security is known as the issuer” (Definition of ‘Security’). Typically securities are divided into equities that represent ownership interest that the shareholders in an organization hold and debt securities representing borrowed funds that must be paid back. In this essay I will be discussing the significance of understanding the differences between fixed income securities and common stock securities.
In the United States, the sales of securities are regulated by organizations like the Financial Industry Regulatory Authority and the Securities and Exchange Commission or for short the SEC. Publicly traded companies have two classes of securities they issue, which are common stock securities and preferred stock securities. A security is what is considered a paper asset with the potential to be traded in small denominations (mostly) in the secondary market. Securities that pay a fixed amount of income are considered to be fixed-income securities i.e. bonds or preferred stocks. Bonds are debt securities that are dispensed by the government and corporations having a face value, or par.
Unlike bonds preferred stocks are a representation of equal ownership within the issuing corporation having no maturities but the ability of the giver to cash in, or call the shares at par.
Now a common stock security on the other hand is different from fixed-income securities. They are considered to be the simple form of ownership of any organization or corporation. Every