Investment securities are tangible certificates or documents that indicate ownership or interest in a business, asset, debt instrument, or government entity.

There are two common types of investment securities: debt securities (such as bonds, Collateralized debt obligation, mortgage-backed securities, or debt-issued derivatives) and equity securities (such as common stock or options).

Investment securities may be purchased on a market place or an alternative listing (such as the Pink Sheets or Over-the-Counter) with the fundamental purpose of earning a profit. Individuals, businesses, or government entities will purchase investment securities to diversify their funds and attempt to generate a profit following the sale of their particular investment security.
Debt Obligation Investment Securities:

A debt obligation investment security is a type of financial instrument where the investor purchases a form of debt from the issuer. Bonds, which are the most common form of debt obligation investment security, are issued by corporations, municipalities, or government entities. When an individual or business entity purchases a bond from the aforementioned issuers they are in essence lending the institutions money for the promise that the issuer will recoup the principal investment in addition to interest payments. The money obtained through the issuance of a bond is used to finance expenditures and provide public services. In turn, the investor will make a profit off the bond (assuming the issuer doesn’t default) through the obtainment of coupon payments.

Bonds are issued with varying maturity dates, coupon payments, and interest rates. Regardless of the specifics associated with the investment security, all bonds are considered debt-instruments that are supplied by the issuer to raise money and are purchased by the investor to earn a profit through the obtainment of interest payments.

Other forms of debt obligation securities include: Treasury Bonds, Treasury Bills, General Obligation and Revenue Bonds, Participating bonds, Zero Coupon Bonds, Convertible Bonds, Treasury Notes, High Yield (Junk) Bonds, Indexed Bonds, Mortgage Backed Securities, Warrant Bonds, Sinking Bond Funds, and Commercial Paper.

Investment Securities that take the form of equity are typically purchased as shares, which represent partial ownership in a publicly-traded company. The investment in such a company will earn a profit if the stock price exceeds the investor’s purchase price. The following examples are regarded as equity investment securities: common stock, par value, book value stocks, dividends, ex-dividends, treasury stocks, depository receipts, DRIPS, commodities, and varying classes of stock.

In addition to generic stock purchases, investors may purchase derivatives, which are financial instruments that are connected to their underlying security.

A stock market crash refers to any dramatic and excessive decline of stock prices across a significant section of the stock market. Such a precipitous drop contains numerous negative externalities that are tied into the significant loss of paper wealth.A Stock market crashmay be fueled by an assortment of economic factors such as the collapse of the credit market, hyperinflation, the ‘bursting of a bubble’ (housing or .com for example), a global event (such as a terrorist attack), sharp fluctuations in the prices of commodities, failed or a lack of regulations, etc.

Although an event (such as the ones described earlier) is typically needed to cause a precipitous drop in the prices of stock, panic among investors is the primary characteristic to fuel a stock market crash. When investors follow a herd mentality by executing mass-sales (typically executed when confidence is low or individuals are fearful of losing their wealth) the prices of stock invariably tumble. Such an event sparked the Great Depression, where the majority of investors (due to a lack of information and over exposure to the markets) all sold their positions with reckless abandon.

Some economists describe a stock market crash as social phenomena where external economic events combine with crowd psychology to negatively affect the macro-economy. Typically, stock market crashes take place following these conditions: a prolonged period of rising stock prices and excessive investment into the market generated by an overwhelming sense of economic optimism, a market where price to equity rations exceed long-term averages, or when extensive use of debt is used by market participants. 

There is no numerically significant decline that is needed to define the presence of a stock market crash; however, the term is typically attached to economies that experience double-digit percentage losses in a given stock market index over a period of several days or weeks. Stock market crashes are distinguished from bear markets or common recessions based on the severity of decline experienced.

Bear markers are defined as periods of steady declines in the prices of stock that take place over months or years; as a result  of the extended length, bear markets and stock market crashes, although portray a significant decline in the price of stocks, are not held synonymously.

A money market account is a unique type of savings account offered by credit unions and commercial banks. Although a money market account is offered like a regular savings account, the primary difference between the two saving strategies is that money markets are attached with higher interest payments and require a higher minimum balance to avoid monethly fees. Additionally, the typical money market account will only allow an individual or entity to withdraw monies from the account 3 to 6 times per month.

Another difference between a money market account and a typical savings account is that, similar to a checking account, the majority of money market accounts enable the investor or saver to write up to three checks per month. The checks issued, will debit monies directly from the money market account similar to a typical checking account.

Similar to bank accounts, the monies kept in a money market account are insured by the Federal Deposit Insurance Corporation (the FDIC). This insurance policy offers protection to the investor even if the underlying bank or credit union goes bankrupt or insolvent.

What does a Bank or Credit Union do with your Money?

Money market accounts are deposit accounts offered by banks or credit unions. The money kept by a bank account or credit union is then subsequently invested in corporate and government securities. In turn, the money market account and the coordinating bank or credit union will pay the depositor interest according to the current interest rates in the money markets.

Similar to a Negotiable Order of Withdrawal Account, a money market account is structured in accordance with Regulation Q, which forbids paying interest on generic checking accounts. As a result, money market accounts bear interest, and enable the depositor to write checks; however, due to various restrictions, money market accounts are not legally viewed as checking accounts.

Since a money market account is not viewed as a transaction account, the investment option is subject to the regulations on saving accounts, primarily the restriction that impedes a depositor from accessing more than 6 withdrawals to third parties per month. Banks or credit unions will discourage depositors from exceeding such limits by imposing high fees or by closing their accounts.

The FDIC is an independent agency of the United States Federal Government that was created in 1933 as a result of the multitude of bank failures due to the economic boom of the 1920s and the subsequent collapse of the economy during the Great Depression. Since the FDIC’s creation, not a single person has lost money by keeping their money in a bank or credit union that was insured by the FDIC.

The monies kept in a money market account with a credit union are insured by the National Credit Union Administration.

A mutual fund is a professionally managed collective investment strategy that pools money from multiple investors for the mass-purchase of investment securities. Mutual funds–which are typically comprised of stocks, short-term money market instruments, bonds, commodities, other mutual funds, and other securities—are popular investment options due to their enhanced strategy and their ability to diversify risk through wide-spread investment of multiple industries and sectors.

A mutual fund is managed and run by a fund manager that trades (actively buys and sells) the fund’s investments in accordance to the fund’s overall investment strategy or objective.

In the United States, all mutual funds are registered with the Securities and Exchange Commission (SEC) under both the Internal Revenue Service (IRS) and SEC’s regulations. As a result of this adherence, all mutual funds that are formally created in the United States must distribute nearly all of its net realized gains and net income from the sale of their securities to its investors. The distribution of gains and income must be awarded to those individuals who invest in the fund (who deliver funds to the manager for the right to buy and sell securities) at least annually.

The majority of funds in the United States are overseen by a group of managers or by a board of directors. As a result of this structure, the board, along with the investment adviser and other service organizations, is primarily responsible for ensuring that the fund is managed appropriately and in accordance with the bylaws of the fund’s investment objective. Regardless of the fund’s organizational structure; however, all mutual funds must manage their investments based on the best interest of the fund’s investors.

Since the passage of the Investment Company Act of 1940 and the Investment Advisers Act of 1940, there have been three general types of registered investment companies in the United States of America: open-end funds (mutual funds), closed-end funds and unit investment trusts. Recently; however, this classical interpretation of an investment company has evolved to include novel types of investment strategies, such as exchange-traded funds and hedge funds.

Open-ended Funds

The term “open-ended fund” simply means that at the end of every trading day, the mutual fund will continually issue new shares to potential investors who will buy into the fund and must be ready to buy back shares from investors redeeming their shares at the present net asset value per share.

Mutual funds are structured as corporations or trusts, such as business trusts. Any corporation will be classified by the Securities and Exchange Commission as an investment company if the fund issues securities and predominantly invests in non-government securities. An investment fund will be classified as an open-investment company by the SEC if the fund does not issue undivided interests in specific securities and if it issues redeemable securities.

Mutual funds in the United States must use SEC form N-1A to report their average annual compounded rates of return for 1-year, 5-year and 10-year timeframes; the average annual compounded rates elucidate upon the average annual total return of the fund.

The following formula is used to calculate the average annual total return of a mutual fund: P (1+T)^n=ERV where P=a hypothetical initial payment; T=the average annual total return; and N=total number of years.

The fee structure associated with a mutual fund is divided into two or three components: non-management expenses, management fees, and the fees associated with 12b-1/non-12b-1 fees. All expenses associated with a mutual fund are expressed as a percentage of the average net assets of the fund.

Online stock trading is a form of self-direct investing that allows an individual investor to partake in the buying and selling of stocks or options through the use of an internet marketplace or platform.

As a result of the rapid-pace, low-commissions, minimal fees, and overall ease of access, online stock trading has become the norm for individual traders and investors. Due to this popularity, the majority of brokers no offer online services that contain unique trading platforms to expedite online stock trading.

Benefits of Online Stock Trading:

Before online stock trading was made available, investors had to call up their hired brokers and place their particular orders over the telephone. The broker would take the order and execute the trade by placing the order into their system, which was directly linked to the coordinating trading floors and exchanges. With the advent of the Internet; however, investors are now able to execute instant trades with other investors via electronic communication networks. Although some orders entered through the Internet are still routed through the broker, the process of online stock trading is exceptionally faster than the prior technique.

The majority of online stock trading must be approved by agents who monitor the trades. This fundamental step assists in the protection of both the brokerage firm and the client from unlawful or incorrect trades.

Prior to online stock trading the fees associated with executing a trade through a tangible broker was exorbitant. The majority of online brokers are referred to as discount brokers, because the same fees associated with physical brokers are exceptionally lower when executed online. The fees attached to online stock trading are lower due to the speed in which the trade is executed (exponentially more trades can be executed) and online stock trading does not deliver investing advice that is commonplace with a generic broker.

Risks Associated with Online Stock Trading

Before you choose to invest or take part in online stock trading, it is essential that you adequately research the online broker that is being utilized. You must assure that the online broker is licensed with the coordinating state or provincial jurisdiction in which the online stock trades are executed.

The Federal Government of the United States provides tips to avoid investment scams through the issuance of their On Guard Online website.

Potential investors must also understand the potential risk of investing without the aid of a licensed and trained Stock Broker or Investment Professional. These individuals are well-versed in trading and understand the compliance issues associated with investments. Forgoing this information and knowledge could prove costly. As a result of this, the majority of online stock trading companies or online brokers will offer a number of investment tools that may be utilized by individuals.

Once you have researched the aforementioned information, you must research the particular sectors and the coordinating business and financial statements of each company whose stock you plan on purchasing. This knowledge, along with a diversified investment strategy will assist in mitigating the risks associated with the volatility of the stock market and the general risks associated with online stock trading.

An amortization schedule is a table, which details the periodic payments on an amortizing loan (typically a mortgage) as it pertains to a coordinating amortization calculator.

The term “amortization” refers to the process of paying off a debt (primarily a loan or a mortgage) over a standardized time through regular payments. A portion of each payment is used to satisfy interest while the remaining amount of the payments is applied towards the principal balance. The percentage of principal versus interest in each payment is thus determined through the amortization schedule.

That being said, a portion of every payment is applied towards both the principal and the interest of the loan; the exact amount applied to the principal will vary each payment—the leftover amounts from the principal payments go towards the fulfillment of the interest. As a result of this relationship, the amortization schedule reveals the specific monetary amount placed towards the interest as well as the specific amount put towards the principal balance. In the beginning payment periods, a large portion of each payment is devoted to interest; however, as the loan matures, larger portions of the amortization schedule go towards paying down the principal. 

An amortization schedule runs in chronological order; the first payment to the schedule takes place one full payment period after the loan was taken out and not on the first day or the amortization date of the loan. The last payment to the amortization schedule will pay off the remainder of the loan; typically the last payment is delivered as a slightly different amount to the preceding payments. 

An amortization schedule, in addition to breaking down each payment into principal and interest portions, will reveal an interest-paid-to-date, a principal-paid-to-date, and the remaining principle balance on each payment.

Types of Amortization Schedules:

    Straight line amortization schedules

    Declining balance

    Bullet (an all at once amortization schedule)

    Increasing balance amortization schedule (a negative amortization schedule)

    Annuity

Those individuals with higher credit scores will be awarded with a lower APR. The lower APR is awarded to an individual with a higher credit score because of the mitigated risk of default—the issuer of the card views the individual as a safe investment and therefore grants the individual with the ability to possess 0 APR credit cards or credit cards with low APRs. The variables that calculate the APR can fluctuate upwards to 50%, meaning some cards may carry an APR of 50% while others may have an APR of 0.

The APR is only attached to the remaining balance of a credit card. If the individual fails to pay the complete balance owed and opts instead to pay the minimum balance, the APR will be attached to the remaining balance and then carried over to the following month.

What is a 0 APR Credit Card?

When an individual applies for 0 APR credit cards they are looking to obtain a credit line where the attached annual percentage rate is zero. As a result of the 0% APR, the individual can save a substantial amount even if he or she makes minimum payments. That being said, the majority of new credit cards are issued with a fixed timeframe of 0 APR. These cards are used to entice borrowers who are looking to lock-in 0 APR credit cards regardless of the timeframe.

Those lenders that issue 0 APR credit cards for a fixed timeframe typically do so for the borrower’s first year of use. After this time, the APR is adjusted based on the individual’s credit history and finances and is then attached to the remaining balance (if applicable) of the card.

A car loan amortization is a fundamental means to finance the purchase of an automobile. In the simplest of terms, a car loan amortization is a type of loan used to purchase an automobile. Dissimilar to a lease, a car loan amortization is financing–given by the lender to the borrower or purchaser of the automobile—that is paid off through fixed-periodic payments used to diminish the interest attached to the loan as well as the overall principal or loan amount.

In regards to economics, amortization refers to the distribution of a single lump-sum cash flow into many smaller cash flow payments or installments, as determined through an amortization table or schedule.

A car loan amortization contains a repayment structure that is held separate from a standard loan. Typically, a car loan amortization possesses a longer maturity schedule where both interest and the principal require repayment. Unlike other repayment models, each repayment in an amortization consists of satisfying both the principal balance and the interest attached to the loan.

Amortization is primarily used in loan repayments, most commonly in mortgage loans or sinking funds. The payments are divided into equal amounts for the duration of the maturity schedule. As a result of this uniformity, the amortization is regarded as the simplest repayment model. That being said, a larger amount of the payment towards the amortization is applied to the interest of the loan at the beginning of the amortization schedule, while more money is used to satisfy the principal at the end of the amortization loan.

In an accounting sense, loan amortization refers to expensing the cost of acquisition from the residual value of intangible assets such as patents, trademarks, copyrights or other forms of intellectual property.

In a more common sense, amortization refers to the tangible process of paying off a debt, such as a loan or a mortgage. The process in a loan amortization is satisfied through the delivery of regular payments made at uniform times. A portion of each payment is used to satisfy the interest while the remaining payment amount is applied towards the principal balance. The percentage that goes into satisfying both the interest and the principal balance is determined through the amortization schedule.

A car loan amortization is deciphered by the macro-economic conditions of the market (primarily the interest rates) the credit score of the borrower, and the intricacies that revolve around the specific car loan amortization. Typically, those individuals with good credit scores will be awarded with lower interest rates and vice versa.

Additionally, the cost of the car and the economic health of the underlying dealership or manufacturer will factor into the terms of the specific car amortization loan. To view a particular amortization schedule a borrower (either an entity or an individual) can observe the specifics of their repayment plan by inputting various components within an amortization calculator. Once the information has been satisfied an individual will be able to view the dates, amounts, and effects of each of their periodic payments and those payments relate towards to the repayment obligation of their particular loan.