There are several kinds of marketable securities, including stock and bond funds. Certificates, derivative instruments, financial derivatives, investment securities and mortgage-backed securities are a few other kinds of marketable securities. Stock indexes, mutual funds and bonds are usually included in a description of marketable securities. The marketability of an issue is the ability to sell or transfer the underlying securities within a short period of time.
A company’s stock is typically listed on the stock exchange. This gives investors a way to buy shares of a company at an established price. A company’s stock may also be traded futures, options or direct. Stock markets give investors the opportunity to make money by buying low and selling high. However, it is important to know which marketable securities are best for an investor to invest in to generate short-term income.
Among the marketable securities that are best to use as short-term investments are those within one year of date. These include bank CDs, mutual funds, money market and treasury bonds. Ordinary bank, CD’s are guaranteed by the federal government, and thus are highly liquid investments. Money market mutual funds offer higher rates of interest than bank CDs. Treasury bonds are issued by the U.S. government and are highly likely to be secure as well.
Short-term investors need to find marketable securities that pay high dividends or capital appreciation to increase their cash balance. High dividend paying stocks provide the best returns when used as investment tools. When an investor wants to generate cash from his investment portfolio, he should buy stocks that have the highest share price and the highest dividend yield. Dividends are income that an investor receives from the sale of his or her stock. A shareholder will have greater returns if he buys shares that pay high dividends.
Some people prefer to invest in marketable securities that are market-isolated. These types of investments do not come under the umbrella of traditional bank accounts like common stocks and mutual funds. An example of marketable securities that are not bank accounts are government bonds, corporate bonds, alternative investments like real estate notes, and private stock offerings.
To increase the chances of generating short-term income, an investor should buy marketable securities that have a strong secondary market. The secondary market is where securities are traded back and forth between investors instead of between market makers and institutional investors. When the secondary market is weak, the price of securities will be lower, allowing investors to purchase them for a lower price and make a profit when they sell. To help investors who are interested in buying marketable securities with a strong secondary market, some brokerages offer market assistance programs to help investors find strong market pairs to invest in.
Because there is significant risk of loss involved with purchasing marketable securities through brokerages, some investors choose to invest in less-liquid markets. For instance, a mutual fund account may have less exposure to interest rate risks than do some other investment types. The lack of liquidity makes these types of securities less appealing for most investors.
To diversify, an investor should consider investing in marketable securities that are not marketable. The most popular non-marketable securities are government bonds and certificates of deposit (CDs). By limiting the amount of risk that is involved with holding these types of securities, they provide a great deal of diversification without the significant downside of loss that is often associated with marketable securities. If you are looking for ways to increase your chances of success, you should consider all of your options.