Marketable securities are financial instruments that can be easily converted into cash at a fair price. They are highly liquid assets that companies and investors often hold to manage their short-term cash needs or to invest excess capital. In this article, we will explore various examples of marketable securities and understand their significance in the financial markets.
One of the most common examples of marketable securities is stocks. Stocks represent ownership in a company and are traded on stock exchanges. Investors can buy and sell shares of publicly-traded companies, making them highly liquid and easily convertible into cash. Examples of well-known stocks include Apple Inc., Microsoft Corporation, and Amazon.com Inc.
Bonds are another type of marketable security. They are debt instruments issued by governments, municipalities, and corporations to raise capital. Bonds pay periodic interest payments to bondholders and return the principal amount at maturity. They are highly liquid and can be bought and sold in the secondary market. Examples of bonds include U.S. Treasury bonds, corporate bonds, and municipal bonds.
Commercial paper is a short-term debt instrument issued by corporations to meet their short-term financing needs. It is a highly liquid marketable security with a maturity of less than one year. Commercial paper is typically sold at a discount and provides companies with a quick source of funds. Examples of companies that issue commercial paper include General Electric, Johnson & Johnson, and Procter & Gamble.
Money market funds are a type of mutual fund that invests in short-term, highly liquid marketable securities. These funds are designed to provide investors with a stable and low-risk investment option. Money market funds typically invest in U.S. Treasury bills, certificates of deposit, and commercial paper. Examples of money market funds include Fidelity Cash Reserves and Vanguard Prime Money Market Fund.
Another example of marketable securities is certificates of deposit (CDs). CDs are time deposits offered by banks and financial institutions. They have a fixed maturity date and pay interest at a predetermined rate. CDs are highly liquid and can be redeemed before maturity, although there may be penalties for early withdrawal. Examples of banks offering CDs include JPMorgan Chase, Bank of America, and Wells Fargo.
Lastly, we have repurchase agreements (repos). Repos are short-term agreements between a buyer and a seller, where the seller agrees to repurchase the securities at a specified price on a future date. Repos are highly liquid and are used by financial institutions to manage their liquidity needs. Examples of securities involved in repos include U.S. Treasury securities, corporate bonds, and mortgage-backed securities.
In conclusion, marketable securities examples include stocks, bonds, commercial paper, money market funds, certificates of deposit, and repurchase agreements. These instruments play a crucial role in the financial markets, providing liquidity, diversification, and investment opportunities for individuals and institutions alike.
