What is a marketable security?

A marketable security is defined as a financial instrument that can be easily converted into cash, typically because it is traded on a public exchange or otherwise has a liquid market. These securities include stocks, bonds, and other financial instruments that can be quickly bought or sold with relative ease. The fundamental characteristic that distinguishes marketable securities is their liquidity, enabling investors to convert their holdings into cash without significant price discounting.

This quick conversion to cash makes marketable securities an attractive component of an investment portfolio, as they provide flexibility and access to funds when needed. Investors often prefer marketable securities over non-tradable assets or investments that require a longer time frame to liquidate because they allow for easier management of cash flow and investment strategies.

In contrast, other options describe financial instruments or loans that either lack liquidity or are not designed for easy conversion, which does not align with the definition of marketable securities.