Types of financial securities inside the stock market

Stock market has list of different financial security products listed inside it.

Financial products may vary depending on individual stock exchanges.

We are going to look major types of financial securities listed inside the stock market here.

Stocks or equities or shares

  • Stocks or shares are issued by exchange listed companies to market participants as a claim of there ownership when they buy it.
  • You can invest in stocks and use stocks for speculation also

Derivatives

Products derived from an underlying asset is called as derivatives. Derivatives are in form of monthly and weekly contracts that expire on a given date.

Two major types of derivatives are

  • Futures
  • Options

Equity derivatives

  • Equity derivatives are derived products from a stock or equity.
  • Stock is the underlying asset from which equity derivatives products like stock futures and stock options are derived.

Commodity derivatives

  • Commodity derivatives are derived from commodity products like GOLD, SILVER, CRUDE OIL etc
  • Both futures and options contracts are available inside commodity derivatives

Currency derivatives

  • Currency derivatives are contracts derived from an underlying currency pair like EUR/USD or USD/INR
  • Future contracts of currency are also called “FX future”

Mutual Funds

  • Funds collected by various numbers of investors to invest and trade in financial securities is called mutual funds
  • A mutual fund scheme can invest in multiple assets
  • Mutual funds can include both retail investors and institutional investors
  • Major benefits of a mutual fund for an investor is its diversification

Indices

  • Indices are barometer or a measure of a specific market segment
  • An index consists of various financial securities
  • Indices are also called index
  • A stock index value is an average made up of a group of stocks
  • When stock values change inside a given index, the value of the index also changes
  • Index futures and Index options contracts are vastly traded instruments

IPO – Initial public offerings

  • When a company issues there share for the first time to the public it is called initial public offerings (IPO)
  • Markets, where companies gets listed for the first time, are also called primary markets
  • Investors can directly buy shares of companies from primary markets

Interest rate futures

  • Interest rate futures are derivatives contracts
  • Its derived from an underlying interest rate asset.
  • Best used for hedging
  • Helps in utilizing the fluctuation of interest rates

Corporate bonds

  • Public and private corporation bodies can issue debt securities called as corporate bonds
  • Helps the issuer to raise money
  • It assures investors of a fixed return at a given period of time, called as the maturity date

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