• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

The Marathi Investor

Survival is the only way to get Rich

  • Home
  • Stocks Market Basics
  • Investing
    • Investing Books
      • Common Stocks and Uncommon Profits
      • the DHANDHO INVESTOR
      • Security Analysis
      • Stocks to Riches Book Summary
      • Intelligent Investor
      • One Up On Wall Street
      • the DHANDHO INVESTOR
  • Accounting
  • Mutual Fund
  • Bitcoin Investing
  • Contact Us

types of securities

Classification of Securities: Chapter 5

June 29, 2021 by Laxman Sonale Leave a Comment

Hello friends, in today’s article we see the classification of securities from chapter 5 of the Security Analysis book. In this chapter, the author explains how people classify securities and how they wrong and the author gives the specific reason and accurate classification.

The Previous chapter 4

Classification of Securities from chapter 5 of Security Analysis book:

Classification of Securities

In this, the author gives the how the grouping of securities is mention by people

let’s see

Conventional Grouping of Securities:

So these securities grouped in two parts i.e. Bond and Stocks

In stocks contain two stocks one is preferred stocks and the other are common stocks.
Classification of Securities

So we all know those are bonds and the bondholder has the first claim on the company.

If they don’t get the interest on that bond then they have the first claim on the company Asset.

But those are stocks holders they assume that whatever the profits go on that basis they get the maximum profits on shares. (Classification of Securities)

If the shares go down or the company files for bankrupt then they lose the all money because those are bondholders who take the first claim on the company asset.

So the author says, this conventional grouping of securities is not in the right way.

So for the above conventional groups, the author gives the three objections.

  1. Preferred Stocks is grouped with common stocks (diagram image) instead that they have to group with bond.

Because Preferred stocks get the fixed income, so they one side they are a technical legal partner of a company but actually, they are like bondholder, then that type of results they got also.

This means they can not participate in the profits of the company (dividends), which means they get what is fixed, on that preferred stocks, that much amount only get them. (Classification of Securities)

2. Another problem is people compare the Bond with safety, but this is a big mistake.

So you can say, bond as a whole instrument because they have the first claim on company asset.

Safety does not depend on because they are bonds, it depends on this  the comapanies asset that defeats the obligation of the company ( means beat the bond interest payment and other companies problems)

so this point includes the real safety not on this to buy the bond and stay safe is not happen.

Because, if companies don’t have earnings and their asset not capable to pay the bond interest so without that bond is not a safe investment.

3. Title is not used rightly for accuracy purposes, saying anything to any securities just like the following example.

Preferred stocks look like stocks but actually, they work like bond and other deviation also present in financial instrument list like Convertible bond, purchase margin, Warrant, Participant preferred stocks, Non Voting stocks. so this all deviation and also other no voting stocks not we are put in this list that above mentions image, and they put in common stocks but they don’t work like that. (Classification of Securities)

Participant preferred stocks, so these are preferred stocks but we can’t put in preferred stocks, because they are participants.

So the author says, ” this all above classification is not the right way.”

So whatever the characteristics of financial instruments, they are not divided on their characterists.

then the author gives their own Classification.

So they divide them into three classes:

1. Class I (Fixed-value type)

2. Class II (Variable-Value type)

3. Class III ( Common Stock type)

 

  1. Class I ( Fixed-Value type): In this class, include the high-grade bond and preferred stocks.
  2. Class II ( Variable-Value type): In this class includes two types A) Well Protected issues with profit possibilities B) Inadequately protected issues.

A) Well Protected issues with profit possibilities: in this, the issue is well protected but has profit possibilities.

so that’s why they are variable values, e.g. High-Grade bond, Convertable bond.

B) Inadequately Protected Issues: In this have the profit, but they are not fully protected they have Inadequately protection issues, for example, lower-grade bonds or preferred stocks. (Classification of Securities)

So they have the profits chance because they are very cheap in price.

3. Common Stocks type: In this include share (stocks) that we talk about almost every time.

So now let’s talk about the advantages and disadvantages of these all classes.

  • Class I, in this the owner’s main purpose is the principle of safety and interest safety and we want steady income from these securities.
  • In Class II, the principle value changes regularly, so that why they have significance. so let’s see type A: in this, you get the safety and you have another possibility is conversion so that you can make a profit in that. let’s see type B: In this, your loss may be happening, in lots of forms and you also get lots of gain on principle.
  • In class III, In this compare with Class 2 type B

so in this difference is those are class II type B have the priority as compare to Class III and they have some protection in class II type B.

Another difference is those are Class II and type B have the profit possibilities, and in this, you get the substantial profit, so but class II type B have the limits so but in Class III in common stocks there is no limit on profits as compare to the class II type B.

So other says, ” those securities that have the characteristics of the common stock, they include in class three, whatever they name are, whatever those are like, common stocks or bonds or convertible bonds or any other financial instruments. (Classification of Securities)

lastly, the author says,” Do not classify securities on the basis of the title of the issue, but the practical significance of its specific terms, and status to the owner.”

So this is all about the classification of securities from chapter 5 of the security analysis book.

[Read more…] about Classification of Securities: Chapter 5

Filed Under: Security Analysis Tagged With: bonds, bondsholder, characterisitcs of securities, company, company securities, financial instruments, issues, securities, securities issues, security analysis, security analysis book in hindi pdf, sharemarket, sharemarket price, stocks, stocksholders, stocksmarket, the author, types of securities

Primary Sidebar

Search Post

Please follow & like us :)

Facebook
Facebook
fb-share-icon
YouTube
Instagram
Twitter
Visit Us
Follow Me
Tweet
Pinterest
Pinterest
fb-share-icon
LinkedIn
LinkedIn
Share
Telegram

Recent Posts

  • What is Ethereum and Smart Contract?
  • Blockchain Technology Investment
  • Is bitcoin the future of Money?
  • Is Bitcoin a Currency or an Investment?
  • How Bitcoin’s Prices Increases in Past?

Recent Comments

  • How to win friends and Influence People - book summary pro on Security Analysis: Chapter 15
  • Zero to One Book summary - book summary pro on Intelligent Investor: Chapter 14
  • Top 10 best books on Self Help - book summary pro on Intelligent Investor: Chapter 20
  • Top 10 Best books on Money - book summary pro on Intelligent Investor: Chapter 18
  • Best Books on Investing - book summary pro on Intelligent Investor: Chapter 20

Categories

  • Accounting (1)
  • Bitcoin Investing (10)
  • Common Stocks and Uncommon Profits (12)
  • Intelligent Investor (19)
  • Investing (10)
  • Investing Books (1)
  • Mutual Fund (1)
  • One Up On Wall Street (22)
  • Security Analysis (16)
  • Stocks Market Basics (1)
  • Stocks to Riches Book Summary (11)
  • the DHANDHO INVESTOR (13)
  • Uncategorized (1)

How to deal with Mr. Market

The Intelligent Investor Chapter 8:- Investor and Market Fluctuations

50,000 Frenchman can be wrong

One up on wall street Chapter 20

Best time to Buy and Sell Stocks

When to Buy and sell stocks

Common Stocks and Uncommon profits Book Summary

Common Stocks and Uncommon Profits book review

One Up On Wall Street:- Chapter 13

One Up On Wall Street Book: Chapter 13
What is Ethereum

What is Ethereum and Smart Contract?

April 29, 2023 By Laxman Sonale Leave a Comment

Hello friends, in today’s article we discuss Ethereum and Smart Contracts Explain. After reading this you get the good and bad things about Ethereum and Smart contracts. Previous Article on BlockChain Ethereum and Smart Contracts:- After Bitcoin, the second most extensive network is the Ethereum network of blockchain technology. Just like Bitcoin technology saves the […]

Blockchain Technology Investment Good or Bad?

Blockchain Technology Investment

July 13, 2022 By Laxman Sonale 1 Comment

Hello friends, in today’s article we see the Blockchain Technology Investment in form of Computer science and understand the basics and their goals. We see in the previous article, that the main goal of making a bitcoin is to remove the Bank to make payments person to person. to complete this goal, one system is […]

Is bitcoin the future of Money?

Is bitcoin the future of Money?

May 20, 2022 By Laxman Sonale 1 Comment

Hello friends, in today’s article, we see whether is bitcoin the future of money? what happens in the future if cryptocurrency is ruled by the government, let’s understand all questions answered in this blog. Previous Article on Bitcoin Is Bitcoin the future of money:- Before starting this discussion, I read a previous article on bitcoin, […]

Is Bitcoin Currency or Investment?

Is Bitcoin a Currency or an Investment?

May 20, 2022 By Laxman Sonale 1 Comment

Hello friend, in today’s article, we see is bitcoin a currency or an investment? and what is the effect on our economy and how we can use it for our best use? so let’s see each and every factor. Previous Bitcoin Article is Bitcoin a Currency or an Investment?:- before the start, let’s understand these […]

How Bitcoin's Prices Increases high in past?

How Bitcoin’s Prices Increases in Past?

May 20, 2022 By Laxman Sonale 1 Comment

Hello friends, In today’s article, we see how Bitcoin’s prices increase in the past, what are the reasons behind that, and most important question, if Is there any chance bitcoin prices goes up in the future. so let’s see them one by one. Previous Bitcoin Article How bitcoin’s prices increase:-   so, friends, anything product […]

What Gives Bitcoin Value?

What gives Bitcoin Value?

May 16, 2022 By Laxman Sonale 2 Comments

Hello friends, in today’s article, we see what gives bitcoin any value. If bitcoin has any value, so then what things, give the value? so let’s understand step by step. Previous Bitcoin Article Fiat currency and What gives Bitcoin Value?:- In history, Food, animal, gold, and silver coins were used as currency. Because Food is […]

Fire Movement

FIRE Movements in Life

May 1, 2022 By Laxman Sonale Leave a Comment

Hello friends in today’s article, we talk about the FIRE Movements. FIRE means Financial Independent and Retire Early). Everyone wants to retire early, so for that, we writing this blog. so let’s understand how to get retire early. so let’s start Financial Freedom Fire movements:- Financially Independent, Retire Early) The FIRE movement, the concept was […]

Financial Freedom for common man

Financial Freedom for common man

April 11, 2022 By Laxman Sonale 1 Comment

Hello friends, today we talk about Financial Freedom for the common man. Stock Market helps you to achieve this goal. so let’s understand what is the real meaning of financial freedom, and how can we achieve that. Financial Literacy What is the real meaning of Financial Freedom for the common man? In simple words, says, […]

The Dhandho Investor Chapter 12:- Dhandho 401:- Margin of Safety

The Dhandho Investor:- Chapter 12

April 8, 2022 By Laxman Sonale 3 Comments

Hello friends, in today’s article, we see The Dhandho Investor:- Chapter 12, this chapter is all about the margin of safety while you invest in the stock market. so let’s understand this concept in the author’s words. Previous Chapter 11 Dhandho 401: Margin of Safety – Always In this chapter, the author refers the Benjamin […]

The Dhandho Investor Chapter 11:- Fixate On arbitrage

The Dhandho Investor Chapter 11

April 5, 2022 By Laxman Sonale 1 Comment

Hello friends, in today’s article, we see The Dhandho Investor Chapter 11 Summary. this chapter is all about fixating on Arbitrage. so let’s understand, how value investors can take benefit from this arbitrage. Previous Chapter 10 Dhandho 302:- Fixate On arbitrage (Chapter 11) In starting the author explain, what is the arbitrage, and how value […]

Problems with Cryptocurrency

problems with cryptocurrency like Bitcoin

April 4, 2022 By Laxman Sonale 1 Comment

Hello friends, in today’s article, we see the problem with cryptocurrencies like bitcoin. so if you know this problem, then you understand the whole technology, and how it works. so let’s start Bitcoin Story Problems with Bitcoin:- let’s understand one by one 1) Scalability:-problems with cryptocurrencies like Bitcoin In Bitcoin 1 block size is 1 […]

Footer

Financial Literacy

Stocks to Riches Chapter 13L- Financial Literacy to Become Rich

When to Buy Stock ( by Philip A. Fisher)

When to buy stocks

Loss Aversion & Sunk Cost Fallacy Bias

Stocks to Riches:- Chapter 5 Loss Aversion and Sunk Cost Fallacy Bias

Sources of Information about Company

Annual Reports of the Company: security Analysis

Mutual Funds:- Good or Bad?

Stocks to riches Chapter 9:- Mutual fund good or bad

Follow us

Get new posts by email

Copyright © 2023 · News Pro on Genesis Framework · WordPress · Log in