A security is a share of stock, a promissory note, a bond, or any other instrument offered by an issuer on our site.
An “equity security” is just like the common stock of a corporation. You become an owner of the company and the value of your interest fluctuates with the fortunes of the company. As an owner, you generally have the right to share in any profit distributions made by the company, and you also share in the appreciation in the value of the company. When a company dissolves, the owners of the equity securities are paid last, after all the creditors.
.Preferred Equity Security
A “preferred equity security” is just like the preferred stock of a corporation. Typically, the holders of the preferred equity security have a right to receive distributions before the holders of the regular equity securities.
A “debt security” is just like a promissory note or bond. You do not become an owner of the company, but instead, you are a creditor..
“Hybrid securities” have characteristics of both equity securities and debt securities, like a cross between a dog and a horse..
“Convertible securities” start out as one kind of security but can be changed – i.e., converted – into a different kind of security. For example, a company might issue a debt security that can be converted by the holder into common stock at some specified time. Sometimes the conversion is triggered at the option of the holder, sometimes at the option of the company, and other times upon the occurrence of a specified event..
Any kind of security can also be a “callable security,” meaning it can be “called,” or redeemed (bought back) by the company.