When it comes to liquid assets, marketable securities are one of the most preferred investment options among investors due to the high liquidity they offer. Here, liquidity is the capability to convert the asset into cash. Marketable securities can be sold through a bond exchange and/or a stock exchange without any restrictions.

When it comes to different types of liquid assets under marketable securities, there are two broad categories: marketable debt securities and marketable equity securities. Marketable debt securities are short-term bonds issued by a public company but held by a different organization. Marketable equity securities include preferred stock or common stock. Both these types of marketable securities are listed as current assets in an organization’s balance sheet if sold within one year.

Let’s take a look at a few marketable securities that fall under these categories.

• Bonds
  Bonds are the most common marketable debt security. They are a helpful mode of capital for growing organizations. A bond is quite similar to a bank loan; it guarantees a predetermined rate of return, which is known as “coupon rate.” This rate is given in exchange for the use of the invested funds. Every issued bond comes with a maturity date, coupon value, and par value, which is the bond’s face value. On the bond’s maturity date, the issuing entity must repay its value.
• Stocks
  Stocks are one of the most common forms of marketable equity securities. Here, if you invest in the company, you become a part-owner. The company has the right to use your investments as equity capital to finance its expansion and operations. In turn, depending on the company’s profit, you get periodic dividends and voting rights. The value of stocks can fluctuate depending on an organization’s situation. However, stock can prove to be a fruitful investment option if you have sound knowledge about equities.
• Preferred shares
  Preferred shares are another form of marketable security. These shares have certain characteristics of debt and equity. These shares provide common shareholders with benefits like fixed dividends, which are paid before the dividends. This offering makes preferred shares more like bonds. However, bondholders have more seniority when compared to preferred shareholders. In case of a financial crunch, bonds continue to receive interest payments. Preferred shareholders have a few advantages over common shareholders. They receive a fixed dividend and are granted a higher claim on funds if the company goes bankrupt.
• Other marketable liquid securities
  The other forms of marketable securities include derivatives like futures and options and indirect investments, such as unit trusts and hedge funds, money market instruments, and exchange-traded funds. The most reliable liquid securities fall in the money market category, and these are purchased by large financial institutions in vast quantities. These include commercial paper, banker’s acceptances, treasury bills, and purchase agreements.