Marketable Securities​

Short-term securities that are easily liquidated.

What are Marketable Securities?

Marketable securities are unrestricted short-term financial instruments that are issued either for equity security or for debt security of a publicly listed company. The issuing company creates these instruments for the express purpose of raising funds to further finance business activities and expansion. Governments also issue debt securities of this type in the form of T-bills, for funding of public projects and expenditures.

Investors are more eager to grab this type of investment because of the maturity periods, which tend to be less than a year. Converting or liquidating these investments into cash are much easier than other longer-term securities. The instruments are characterized by:

  • a maturity period of 1 year or less;
  • the ability to be bought or sold on a public stock exchange or public bond exchange;
  • having a strong secondary market that can speed up buy and sell transactions, as well as render an accurate price valuation for investors; and,
  • higher liquidity, resulting in less risk but also less returns.

Naturally, however, investment in marketable securities will depend on the investment strategy of the investor or the firm. Marketable securities will often naturally have lower returns compared to longer period or open-ended investments, such as stocks. Since the marketable security is only held for a year or less, there is a lower maturity risk and liquidity risk built into the product.

Marketable securities can be classified differently when it comes to their accounting. There are three different classifications of marketable securities- available for sale, held for trading and held to maturity. These classifications are dependent on certain criteria, but also on the history of transactions any given investor or firm have conducted with their past marketable securities.