Securities, a vital component of any financial plan, often generate returns that outpace your savings and other types of investment. These products are extremely easy to liquidate and typically managed by a financial professional or insurance company. Professional management takes some of the uncertainty out of investing. Below are a few factors anyone saving for the future should know about securities.

An Introduction to Securities

A security is an investment instrument that allows you to buy ownership shares in an asset without taking physical possession. Securities may be shares in a publicly traded company, debt owned by a government or private entity, or a combination of the two. Unlike other investments, securities can be quick to liquidate and are easy to price based on up-to-the-minute market conditions.

Types of Securities

Equity

An equity security is capital stock, which represents an ownership share in a company, trust, or other organization. In addition to value that appreciates over time, some equity securities also entitle you to a share of a company’s profits by paying investors regular dividends.

Debt

Purchasing a debt security—a U.S. Treasury bill, government bond, or debt issued by a private company—means taking an ownership stake in a loan. Because government debt is considered a reliable investment, it typically pays a low rate of return. High-risk debt securities usually have much higher interest rates.

Derivatives

Derivatives are more complex security instruments than stocks and bonds and often generate more revenue than other investments because they’re riskier. Many insurance companies offer stock options, allowing you to purchase equities at an agreed-upon price at a later date. Futures contracts perform much the same way as options but involve shares in commodities like oil, gas, or agricultural crops instead of stocks. Your insurance broker can help you decide whether adding derivatives to your portfolio is a smart financial move.

A trusted broker in Mountain Grove, MO, Farmers Insurance Group offers a wide range of investment products and the detailed financial advice you need. Our agents are dedicated to helping you achieve your dreams and creating a financial plan tailored to your priorities and level of risk tolerance. Call (417) 926-7900 to ask how we can assist you with your investment portfolio, and follow us on Twitter to learn more about our agency.