What are financial instruments?

Fsp Invest, 12 Dec. 2013

Tags: financial instruments, security, securities, financial instruments defined



All of the securities we speak about on a daily basis are types of financial instruments. But what is a financial instrument really? Let’s take a closer look at how they work in practice.


Financial instruments defined
A ‘financial instrument’, otherwise known as a ‘security’ is a promise to pay money in the future, in exchange for money today.  
 
There’s a wide range of financial instruments from which to choose… 
 
Including some types you’re already familiar with like stocks and bonds. 
 
Securities can be primary or indirect. 
 
They can also be marketable or non-marketable. 
 
Primary securities are securities you buy directly from the borrower. 
 
Indirect securities you buy from an intermediary like a bank. 
 
Marketable securities are securities you can sell to other investors on a secondary market. 
 
Non-marketable securities are types of securities that you can’t on-sell to another investor. 
 
Those are the basics of financial instruments to get you started. 
 

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