For you as an investor, fixed-interest and variable-interest securities are of particular importance. The most important fixed-interest securities include bonds, profit participation certificates and mortgage bonds. What they all have in common is that the interest rate remains constant over the entire term. With this investment, you can therefore plan reliably.
In contrast, shares and funds, in which the money of several investors is pooled for investment purposes, belong to the variable-interest securities. Here, you profit from the company situation or market conditions and thus generate varying high returns. However, in addition to the chance of high dividend payments, there is also the risk of market fluctuations and economic problems affecting the company.
Shares represent a special form of securities and securitise a share in a corporation. Investing in a share gives the holder special rights and obligations.
Rights of the share holder
- Right to dividends: profits are paid to you on a pro rata basis.
- Right to vote: you may cast your vote at the company's general meeting.
- Pre-emptive right: You are granted a pre-emptive right in the event of capital increases.
Something different only applies to preference shares. Unlike ordinary shares, these do not give you voting rights at shareholders' meetings, but instead you receive a higher return.
Obligations of the share holder
- Payment of a contribution: You must pay for the share.
- Fiduciary duties: As a shareholder, you must not harm the company.
- Lock-up periods: If explicitly agreed, as an investor you may not sell your securities before a certain period has expired.
Opportunities and risks for investors
The variable interest rate of some securities results in an increased risk. In addition to a mere loss due to strong market fluctuations, there is also the risk of a total loss. The value of shares and fund units is subject to constant price changes on the stock exchange and also reacts to economic fluctuations. When buying securities, you should be aware of the fact that emerging and young companies in particular usually have a high risk of default.
However, the possibility of suffering losses due to a bear market, i.e. sustained price declines, exists equally for all companies. Political risks, such as an embargo or civil wars, and the exchange rate risk of certain bonds should be considered especially when buying securities from foreign companies.
In comparison, fixed-income securities are characterised by lower risk and a fixed maturity compared to CFD in sgexness.com. On the other hand, the yields are in most cases lower than those of the more speculative shares or funds. The special feature of fixed-income securities is that, unlike savings accounts or time deposits, they can be traded. During the trading phase, the price of the securities can rise or fall. One possible reason for this is, for example, a change in the key interest rate by the European Central Bank.
But the biggest risk here is also the risk of default. If the debtor becomes insolvent, the security defaults and is worthless. But you can also profit from the increased risk, since issuers with a high default risk must also offer a higher interest rate.