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What are the investments in debt securities?
If you are thinking about investments in debt securities, you will want to know what these investments include. Debt securities can vary in length, from a single day to many years, and they are based on debt. These options can include both secured and unsecured debt. Secured debt is secured by some form of collateral, while unsecured debts are not backed by any collateral. These securities are issued with a value that is set at a fixed amount, and they can normally be purchased at a discount. A debt security consists of a loan, and involves a borrower and a lender. The borrower will pay the loan amount plus interest by a set date, and this creates the security.
Investments in debt securities can cover a wide range of investment options. Corporate bonds are one of these options. These bonds are issued by corporations to raise capital needed for the company. Corporate bonds may be issued as collateral trust bonds, mortgage bonds, equipment trust certificates, zero coupon bonds, and convertible bonds as the main types. Each type will have different features, and may have unique benefits and drawbacks.
Municipal bonds, issued by municipal entities including cities and states, are created to help the issuing municipal entity raise money for a specific purpose or to increase their operating revenue. This can include new equipment or upgrades to departments, equipment, and services, depending on why the municipal entity has issued the debt. These may be considered general obligation or revenue securities, as these are the two main types of municipal securities offered.
U.S. Government securities are another form of debt securities, and these are issued by the United States Government and are backed by this entity, making them almost foolproof and in very high demand. These bonds will normally offer a lower return in exchange for an extremely low risk that is involved, because the United States government stands behind all the bonds they issued. These may be classified as marketable securities and non-marketable securities. Marketable choices can be traded on markets and exchanges, and include T-notes, T-bonds, and mortgage securities, while non-marketable choices can only be redeemed back to the US government and include Series EE and HH bonds.
Money market securities offer another choice if you are looking at investments in debt securities. These are normally used for short term purposes and are very liquid. Some of these options include negotiable certificates of deposit, usually at a minimum amount of one hundred thousand dollars. These instruments may range from thirty days to a year. Another choice is Treasury Bills, which are also short term and issued by the Treasury Department. Other debt securities in this section include commercial paper debts, banker's acceptances, a repurchase agreement, and money market mutual funds, among others. Money market investments allow you to invest and get a return without any liquidity loss on the market. Your capital is not tied up in investments that could take a time to sell. Money markets are traded, which means they can be bought and sold at any time on the market.
The information supplied in this article is not to be considered as medical advice and is for educational purposes only.
|Securities Investment31 Mar 2010|