Asset classes and types of securities

Securities are securitised asset rights and can be broken down into different asset classes, which differ in their earnings and risk behaviour.

In addition to the classic asset classes equities, bonds, cash or real estate, there are also alternative asset classes such as private equity or commodities. Art, vintage cars and wine are also asset classes.

These asset classes are traded on the Frankfurt Stock Exchange: Corporate shares, bonds/loans, commodities, foreign exchange and real estate.

• You can invest directly in companies by buying shares in them, in the form of equities. Then you are the owner of part of the company.
• You can lend money, usually at a fixed rate of interest, by buying a bond, for example from a state or a company.
• Investing in commodities is also possible, but not directly. You can't buy a ton of oil, but a certificate that represents a ton of oil securitizes it. Or you can buy shares in funds that invest in commodities.
• On the currency exchange, currencies are exchanged against each other at the price of the exchange rates. Although there is no direct foreign exchange trading on the Frankfurt Stock Exchange, there are certificates whose performance is linked to exchange rates.
• At the stock exchange, a distinction is made between asset classes and security types.

A security represents a property right, which is usually accompanied by the right to interest or dividend payment and repayment, or another form of participation.

In the past, securities were paper documents with which rights could be asserted or transferred. They physically changed hands when they were bought or sold. Bonds had detachable paper shavings, the coupons with which investors received interest from their bank.

Marketable securities were referred to as securities, shares and bonds made of paper as effective securities.

Today, most securities are only available in digital form. The shares of a company are documented with a global certificate, and the individual certificates are electronically settled and held in safe custody.

From shares to certificates - everything there is to know

Investors can trade these types of securities on the Frankfurt Stock Exchange: Shares, bonds, funds, ETFs and ETPs, investment certificates as well as leverage products and warrants. Detailed information on opportunities, risks and features can be found in the respective dossiers - table of contents in the top right-hand corner, individual securities with price and master data via searches in the main navigation.

Bonds

Bonds are also called fixed-income securities, bonds, notes, debentures or debentures. Banks, companies or the public sector issue them and thus procure debt capital, i.e. a loan, for a certain period of time. Those who buy bonds regularly receive interest and at the end of the bond's term the money invested is returned. About 27,000 bonds are traded.

Shares

Shares are securities that represent shares in a stock corporation. The owners of a share - the shareholders - are therefore co-owners of the company; they make equity capital available to the company. The shareholders have membership rights, e.g. participation in the annual general meetings, information rights and entitlement to a share in profits (dividend). There are approximately 11,000 shares traded on the Frankfurt Stock Exchange. About 1,000 companies have their home market there. The remainder are mainly traded on other stock exchanges, but are also offered in Frankfurt.

Investment funds

Funds - or investment or mutual funds in their entirety - are issued by fund companies. They bundle the money of many investors. The fund management manages the funds and, depending on the type of fund, invests them in equities (equity funds), bonds (bond funds) or other forms of investment. Investors who purchase a fund unit certificate thus invest simultaneously in various securities; this is often possible even with small euro amounts. The assets of the fund are deposited with a custodian bank. It is not part of the fund company's assets and is therefore called a special fund. In the event of insolvency of the fund company, the fund assets - and thus also the investors' money - are protected.

ETFs, ETCs and ETNs

ETF stands for Exchange Traded Fund. The term originates from the time when investment funds were not yet traded on the stock exchange.

ETC stands for Exchange Traded Commodity. ETCs are exchange-traded debt securities whose value is linked to the development of one or more commodity prices. ETCs are not special funds. However, ETCs that can be traded in Frankfurt are usually collateralised. This means that the bond is covered by the stored commodity or a fiduciary agreement.

ETN is the abbreviation for Exchange Traded Note. ETNs are exchange-traded bonds whose value is linked to the development of a market indicator. ETNs enable so-called exotic investments, e.g. in volatility (i.e. price fluctuations) or in currency pairs (e.g. US dollar/euro). Unlike ETFs, they are usually offered with a limited term. Like ETCs, ETNs are not special funds, but they are not collateralised.

Investment Certificates

Investment certificates are securities that participate to varying degrees in the price development of securities, indices, foreign currencies or commodities. Even if certificates mostly refer to shares or share indices, they are bonds from a purely legal point of view.

Leverage certificates and warrants

Leverage certificates and warrants are, like investment certificates, structured investments that can reflect different price developments. However, they have a leverage, which means that they develop disproportionately to their reference value. Warrants are one of the oldest forms of derivative securities. In their classic form, they are also known as "plain vanilla" warrants.

 June 2019, © Deutsche Börse AG