Factors Influencing the Value of Financial Instruments


Valuing financial instruments is not something that comes easy. You must employ some expertise to know the value of the financial instrument you are about to invest in so as to increase your earnings.

You require an expert to analyze for you the market and the various financial instruments present to enable you make an advised move when investing. You do not want to put your money in a financial instrument thinking it is valuable, only for you to realize later that it is worthless, and that it cannot fetch anything in the market.

Moreover, you want to stay safe from exploitation by some rogue investors who will sell you or convince you to invest in a given financial instrument, by lying to you about its value. Effective trade occurs where both financial markets can agree on the price of the financial instrument of trade.

Luckily, there is trading software that facilitates access to financial markets where you can do your own analysis and employ your judgment to know the value of the financial instruments present in the market. Here https://www.equiti.com/accounts/compare-our-accounts/ for instance you can learn more about the various investment vehicles present in the financial securities market, and how you can be facilitated into making online securities trading a reality. If you’re concerned about potential fraud that you have experienced trading, consider hiring a Securities fraud attorney specially versed in this area.

But, how do I know that a given financial instrument is worth the much stated against it? You ask yourself. Now, you should not be discouraged from securities for not being able to tell the value of the securities. Below are some factors that influence the value of a financial instrument. They will guide you in being able to place some value on a financial asset. They include the following.

1) The Magnitude of the payment

The magnitude of the payment to be made towards a financial instrument determines its value. The larger the payment to be made towards a security is, the more valuable it is. Financial instruments whose payment is low imply their value is low.  Therefore, while trading online, you should be wary of lowly valued financial instruments.

Paying too little for a security should make you realize that the instrument you just obtained is of very low value, or may even be valueless. If you have the capability, always go for the slightly expensive financial instruments since you can be assured of its value.

2) The timing of payment

The timing for delivering payment also determines the value of a financial instrument. The sooner or earlier the timing of payment, the more valuable it is. The further the dates for payments, the lower the value for the financial instrument is. Always consider investing in financial instruments whose time of payment is closer than the rest in the market.

Be careful not to invest in securities whose time for payment is far in the horizon. Always give first priority to earlier paying instruments, as you can be sure of ripping big from it.

3) Probability payment is made

You can always tell the likelihood of receiving payment from a financial instrument. The more likely it is to receive payment from a financial instrument, the more valuable it is. The less likely it is to receive payment, consider letting go of such financial instruments.

Investing in the financial instruments is all about taking some risks. Even though it is about risk-taking, you ought to be conscious of the risks you are taking. Otherwise, it may cost you big time.

4) Conditions under which payment is made

This is basically about the liquidity of the financial instrument. Ask yourself if you can easily receive the payment on the financial instrument, whenever you need it. If yes, then that financial instrument is very valuable. If not, then you must let that financial instrument go, and find another, which you receive, payment when you require it.


Determine whether a financial instrument is valuable so that you do not fall for valueless instruments. By observing the instrument’s magnitude of payment, time of payment, the probability of receiving payment, and the conditions under which payment is received should guide you into knowing the value of a financial instrument.


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