Financial instruments

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Because today there is increasing job competition related to the number of jobs available, the topic of entrepreneurship and financial freedom became more popular; In spite of everything, when we wish to embark on the adventure of be entrepreneurs or be investors nos damos cuenta de que hay muchos términos y herramientas que no sabemos usar y, a veces, ni siquiera sabemos que existen. En este post nos centraremos específicamente en financial instruments that exist and what is their function, so that we can make a choice about whether it is a good idea to invest, and which is the instrument that best suits our needs.

Financial instruments They are tools in which the investor places his money in order to receive a profit that meets his expectations; but we can find that there are many of these financial instruments, por lo que hace falta que tomemos conciencia de la próxima segmentation que existe. Segmentación que nos ayuda a estar bien informados y que nos permitirá tomar mejores decisiones.

So, to start with the analysis of these instruments, it should remain clear that we can divide them into two large groups, cash financial instruments and derivative financial instruments. Each of them has its special characteristics and which are identified by the level of trust and also by the profit opportunity that exists.

Cash financial instruments

East type of financial instruments They are those instruments that have a value that is deeply related to the markets, in this way it is the markets that determine the value of our instrument.

Values

These instruments can be categorized first into securities, but What are values? In a professional way it can be established as the property right of an obligation or a credit title. The value is consigned through a document that enables the holder to have the right to the monetary value autonomously and literally.

A synonym what securities can have are credit titles, which are documents that enable the holder to register the exercise of a private right. This title is related to the specific value mentioned at the beginning of the section.

Some examples of values can be checks, promissory notes and bills of exchange; Therefore, each of them has a net value that cannot be modified, in other words, the value of the credit or the payment obligation; but the price at which it is negotiated may vary.

Derivative financial instruments

TO derivative financial product It is one that has a value that is determined by the characteristics and the proper value of various assets that are directly related to this instrument. Within this classification we can find those securities that are listed on the stock market, and those that are determined as derivatives outside the market.

East type of financial instruments They are the ones with the greatest capacity to generate profits or losses; Repeatedly, these types of financial instruments are used for two things, financing and investment. What does the classification depend on? It depends on whether it is you who grants the sale or who acquires it.

A very specific type of financial derivative instruments They are currencies, since they are assets that have their own value compared to another currency, but this value depends on variables such as economic stability, political situations, etc. In other words, it is a fairly volatile market, so experts recommend having a solid base to invest in said market is to risk our capital recklessly.

But finally to particularly establish the financial derivatives Let us mention the characteristics that identify it. In the first place, its market value is variable and responds to issues such as changes in interest rates or in the price of other financial instruments, or in the case of products, it is the value of the raw material that has been quoted.

It also depends on the exchange rates to which there are different currencies and even in some cases it depends on the specifications of the contract that was obtained to be able to invest in said financial product.

One of the favorite features For many, it is that an initial investment is not needed, or if the amount is needed it is much less than investments that require other types of financial instruments, however, it is essential to consider that, even when this is an advantage, it is also necessary to consider have a solid foundation to invest in this type of instrument.

In summary, the characteristic that identifies financial instruments is that they are settled only on the future date, in other words, their profit or loss is not entirely certain, and it is until the moment the contract is terminated that they are received. profit or loss.
Let's see below which instruments belong to the investment classification and that belong to financial financing products.

Investment financial instruments

They are considered within this category shares and fixed income; those of variable income are those that belong to a final capital, as an example, we have the shares of a company, even when there are some more.

Now the name itself establishes their nature, the fact that they are of "variable" income It implies that there is a variation in the amounts that are received, exemplifying it in a simpler way, we can say that the same share of the same company has a value of 10 euros today, but within a week the value of the same share may be 12 euros.

East type of instruments They have two functions, in general the investor recovers his investment, and they obtain long-term profits, so it results in a good investment, but the truth is that the main reason why these instruments exist is that they serve as financing for the company. whose actions are.

As to fixed income instruments We can mention the debts, this type of investment is much safer than the variable income, even when its yield is clearly lower; some examples of this type of instrument are public and private debts, What public debt, promissory notes and corporate obligations or promissory notes. In a way, it can be said that these instruments are financed at a fixed rate that will be reversed in a certain time.

The issuers of this type of contract Pueden ser desde países, hasta bancos o compañías privadas, lo que hace que el abanico de posibilidades be verdaderamente amplio, dando muchas alternativas sobre dónde inyectar nuestro capital.

Others financial instruments that exist are insurance, of these there is a great variety, from insurance for cars, boats, commerce, etc. These insurances are considered as a financial product because their main function is to provide financial support in unfavorable situations.

Another of the financial instruments with lower risk that exist are the investment funds, In this scheme, the capital is collected by an entity that manages all investors, thus obtaining a capital of a considerable size so that it can be channeled to an investment fund that is granted to a financial entity, which is the that makes the investments and capital movements, once the term agreed with the final lens is over, then recovers its investment and part of the profits generated.

Financing of financial instruments

In this classification of financial instruments loans come in as is mortgages, in which a financial institution grants the amount to be able to obtain a property, so that said institution can finance the purchase; Another type of financial financing instrument is credit cards, this instrument is used to obtain certain products or raw materials so that a business can function.

Another financing instrument that exists is the financial leasing, which is a process similar to a rent, since the tenant pays an established amount during a determined period, in order to be able to make constant use of the property in question; the difference with the rent is that at the end of the period there must exist for the tenant a asset purchase optionand the price you set for this transaction must be less than the market price.

It is essential that when a company has this type of financing Have very good accounting, since the legal and accounting considerations involved in the financial leasing are quite specific and clear, so it is best to always have all the necessary documentation to be able to establish the best alternatives to work with the assets that the company is leasing. . Even when it is feasible that we find leasing not only in companies, but also individually, and a very particular case is that of vehicles, in which the lessee rents a car with the opportunity to buy it at the end of the term.