And What about the Benefits of Equity Securities?

Equity linked securities have advantages of their own. The main one is that the investor has proportional share of the dividends generated by the company in which he bought his stock. For example, imagine that you acquired stock options of Hewlett Packard just after Carly Fiorina was busted. Now that Mark Hurd has become the new CEO, the stock has raised in 50% in less than a year. Another example is Apple just before it launched his iPod and the iTunes system. The stock has multiplied three times its value that means 300%! So, if you had invested US$1000 in Apple, you would have US$3000 right now.

Another advantage is the possibility to have a voting right at the shareholder's meetings that are celebrated each year. That way you will have the option to choose the path the company should follow.

Do They Have Disadvantages?

The problem with debt security is that the organization that issued the bonds could not pay the accorded dividends. Maybe the manufacturing plant mentioned above produced faulty products and a huge recall had to be made. Then the company would have found itself in a very difficult situation for paying their debt. For these reason is good to know the ranking emitted by the entities that analyze this market.

In the case of equity securities, they are tied to the management of the corporations. There are several known cases of mismanagement in corporate America, like Enron (2001) or WorldCom (2002). In the first case it was a widespread use of accounting fraud through out the company, and in the second case it happened something similar.

It's for these reasons that's it's recommended to have a diversified portfolio. That way the investor is protected from any of these unforeseen situations.

Where Can I Buy Them?

If you are a seasoned investor, with years of experience, then you can make your own research. You will save some money in the process since you will not have to pay the broker's commission.

But, if you are a first timer or have little experience with securities, then go to a broker, virtual or real, and ask about the different options they may offer you for your portfolio. Either equity securities or debt securities are an excellent choice for investing your money.