Which term encompasses investments such as stocks, bonds and mutual funds?

Which term encompasses investments such as stocks, bonds and mutual funds?

• A. Securities
• B. Derivatives
• C. Commodities
• D. Currencies

Answer: (A)

Securities are the broad group of tradable financial instruments that give you a claim or ownership in value. Stocks represent ownership in a company, bonds are promises to be repaid a loan to a corporation or government, and mutual funds issue shares that let you own a portion of a diversified portfolio. All of these are designed to be bought and sold in financial markets and are structured to have identifiable rights for the holder, which is what defines them as securities. Derivatives are contracts whose value comes from another asset, such as an option on a stock or a futures contract on oil, so they’re a more specific subset. Commodities are tangible goods like gold or wheat. Currencies are units of exchange used in trading and payments. While some instruments can be related to these areas, stocks, bonds, and mutual funds themselves fit the definition of securities best, since they are the standard tradable financial instruments that confer ownership or creditor rights.

Securities are the broad group of tradable financial instruments that give you a claim or ownership in value. Stocks represent ownership in a company, bonds are promises to be repaid a loan to a corporation or government, and mutual funds issue shares that let you own a portion of a diversified portfolio. All of these are designed to be bought and sold in financial markets and are structured to have identifiable rights for the holder, which is what defines them as securities.

Derivatives are contracts whose value comes from another asset, such as an option on a stock or a futures contract on oil, so they’re a more specific subset. Commodities are tangible goods like gold or wheat. Currencies are units of exchange used in trading and payments. While some instruments can be related to these areas, stocks, bonds, and mutual funds themselves fit the definition of securities best, since they are the standard tradable financial instruments that confer ownership or creditor rights.