Hybrid investments, also known as derivatives or just hybrids, are a form of investment that combines

equity Equity may refer to: Finance, accounting and ownership *Equity (finance), ownership of assets that have liabilities attached to them ** Stock, equity based on original contributions of cash or other value to a business ** Home equity, the diff ...

and

debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The ...

like features, allowing companies to protect themselves against financial risks in securities transactions. This form of investment is essential for traders and investment professionals to diversify their

asset In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that c ...

portfolio. Hybrid Investments work to maintain a sense of security for both the business and investor. Types of Hybrid Investments The two most popular types of Hybrid Investments are Preferred

Stock In finance, stock (also capital stock) consists of all the shares by which ownership of a corporation or company is divided.Longman Business English Dictionary: "stock - ''especially AmE'' one of the shares into which ownership of a compan ...

and Convertible Bonds. Preferred Stocks – Stockholders receive dividend payments on a regular basis and gain funds when share values rise on security exchanges. Convertible Bonds –

Bondholders In finance, a bond is a type of security under which the issuer ( debtor) owes the holder ( creditor) a debt, and is obliged – depending on the terms – to repay the principal (i.e. amount borrowed) of the bond at the maturity date as well a ...

periodically receive interest payments. An exchange of bonds for a specified number of equity shares is acceptable, but only in accordance with the convertible bond covenant. Investors buying these products look to accumulate periodic

fixed-interest A fixed interest rate loan is a loan where the interest rate doesn't fluctuate during the fixed rate period of the loan. This allows the borrower to accurately predict their future payments. Variable rate loans, by contrast, are anchored to the ...

payments and profit when share prices rise in

financial markets A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known in the financial ma ...

. New types of Hybrid Investments are constantly being introduced to meet the needs of professional investors.

References

Phoenix Investments
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