What Is Financial Instruments?

As I mentioned earlier, the financial market is a place where sellers and buyers meet to buy and sell goods and services. The goods and services of the financial market are money and we can earn by trading the financial instruments.

Investors or wealthy people can invest in these financial instruments to earn different returns.

Here are some financial tools you can invest in:

(1).Equities Market

(2).Bonds Market

(3).Commodities Market


(5).Commercial Paper



Securities are a financial instrument that can help business owners or companies that lack money to run a business can raise funds from the public by issuing shares to raise money from the sale of shares to use in their business.

For those who buy or invest in stocks i.e. Buyers or Investors are getting the following four main benefits:


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One of the main benefits of investing in equity securities is the opportunity to increase your money by increasing the value of the shares you buy.


When you invest in equity securities or stocks, you get paid in the form of dividends that the company makes a profit on.


Purchasing a title deed or stock means taking ownership of the company in which you purchased the shares.


For investors who like to invest in many types of financial instruments (for hedging purposes), investing in equity securities or stocks is beneficial in providing diversification

Currently in the Kingdom of Cambodia, there are 7 companies are listing on the Cambodia Securities Exchange, including:

1. Phnom Penh Water Supply Authority (2012)

2. Grand Tween International Factory (2014)

3. Phnom Penh Autonomous Port (2015)

4. Phnom Penh Special Economic Zone (2016)

5. Sihanoukville Autonomous Port (2017)

6. ACLEDA Bank (2020)

7. Pestech (Cambodia) Plc. (2020)


Bonds are fixed income financial instruments that represent loans made by creditors or investors with debtors or borrowers whose debtors are usually companies or governments.

When you invest in a bond, you are investing in a lender, just as you would lend money to a lending company, and they will give you back the interest rate.

It is a financial instrument that provides an opportunity for those who need capital to announce the sale of their bonds to the public as investors.

Investing in bond purchases is less risky than investing in equity securities, but the rewards are lower than investing in equity securities.

The benefits of bond investing are:

Fixed Income

Investors get a steady income because bond investing provides a fixed income from interest payments from the beginning of the investment until the maturity of the bond.

Preservation of Capital

Capital protection is a conservative investment strategy whose main goal is to protect capital and prevent losses in the portfolio.

Low Risk

The risk is low that if the company goes bankrupt as a creditor, you will be the first to get your capital back, unlike the shareholders who will be the last.

Currently, in the Kingdom of Cambodia, there are 6 companies registered to sell their bonds with the Cambodia Securities Exchange, such as:

1. HATTHA Bank (2018)

2. LOLC Microfinance Institution (2019)

3. ABA Bank (2019)

4. Phnom Penh Commercial Bank (2020)

5. RMA (Cambodia) Plc. (2020)

6. PRASAC MFI (2020)


Commodities are any goods or materials that can be traded, and the trading conducts on a Commodities Exchange structure with clear rules such as Chicago Mercantile Exchange (CME) in the United States or London Metal Exchange (LME) in the UK.

Commodities are divided into two major groups.

(1) .Soft Commodities

Soft commodities divide into two type

(A).Agricultural products such as rice, corn, beans, cashews, etc.

(B).Live stock and meat such as pork, pork head, beef and beef cattle, etc.


(2) Hard Commodities

(A).Metals include gold, platinum, copper, lead, etc.

(B).Energy products such as crude oil, gas, etc.

Investment Method

Methods of investing with Commodities can be done in the following ways:

(A).Sport Prices

(B).Futures Prices

(C).Option Prices


(F).Share Dealing


Derivatives market is a market that allows investors to trade on the futures contracts of the original financial instruments, such as foreign exchange currencies, precious metals (gold, silver), crude oil and other commodities.

Derivative Contract Type

Derivatives trading is generally done in the following four forms:


FORWARD CONTRACT is a private agreement between two parties to buy or sell financial assets for a specific price at a specific date in the future. This contract does not have to go through a licensed stock exchange, so it is a trade referred to as OTC (Over The Counter) trading.


In general, the FUTURES CONTRACT is similar to the FORWARD CONTRACT, but there are two main differences.

(A).First, FUTURES CONTRACT is traded only on the stock exchange.

(B).Second, the value of the FUTURES CONTRACT changes daily based on the value of its underlying assets.


PTIONS CONTRACT is different for both FORWARD CONTRACT and FUTURES CONTRACT. It is a contract that gives the parties the option to buy (CALL) or sell (PUT) financial assets at a specific price, called STRIKE PRICE, at a specific date.


SWAPS CONTRACT is a derivative tool used by companies and generally does not work for traders (Traders) without specific capital, although some brokers offer them.

SWAPS CONTRACT involves two parties exchanging financial instruments, such as interest rates, through a third party.

SWAPS CONTRACT is a derivative contract made through two parties exchanging cash flows or liabilities from two different financial instruments. Most swaps involve cash flows based on the Notional Principle Amount, such as Loans or Bonds, although this tool can be used on almost any financial instrument.


A COMERCIAL PAPER is a type of financial instrument that is an unsecured and short-term debt. Corporations  issued this papers and commonly use to finance payroll, accounts payable, inventory and other short-term liabilities.

Deadlines on portfolios usually last the last few days and are rarely longer than 270 days.

A COMMERCIAL PAPER is usually issued at a discount from its inscribed value and reflects the general market interest rate.


Other is a type of financial instrument that is an unsecured and short-term debt issued by a corporation or governments.

You can watch the videos that talking about the What is Financial Instruments by Click Here or other videos such as

(A).What is Financial Market?? Click Here

(B). Financial Institution ?Click Here

(C).Financial Market Classification ?Click Here

(D).What is foreign exchange market ??Click Here

(E).Top 10 Most Corrupt Politicians in The World?Click Here

(F).List 10 Richest People In The World?Click Here




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Thanks for reading this article, if you have any questions, doubts, or discussions please drop your comments below.

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9 thoughts on “What Is Financial Instruments?”

  1. I have always wanted to invest in other things, but so far, I’ve only been able to do cryptocurrency. Iv’e done decent, but I’m looking to put some money in other markets. Thanks for the helpful info, but do you think I should get an actual book?

    1. Yes, It’s the best investment in financial market, but you need more learning about the financial instruments and tools. One more thing you need to develop the trading plan and discipline to follow plan. For more you should read more detail the purpose of the authors and content of the books.

  2. Dividends are my favourite form of investment income – it almost seems like a bit of a bonus because so few companies actually seem to pay them anymore! But as a novice investor, I’ve always leaned towards trackers, Index funds or ETFs to spread my risk through an entire segment of the financial market. So trackers on dividend-paying companies make me very happy!

    How do you feel about currency exchange transactions? As part of a corporate finance team, I was always having to model business decisions based on exchange rates and we would periodically speculate a bit in the currency markets (although mainly to minimise the risk of big capital equipement purchases).

    1. Yes, Great your comments about the financial instruments, especially financial market and investment tools. For currency exchange transactions is good model of investment, even though more risk if you have plan and discipline to do the plan, the profit will come.


  3. Thanks for showing us ways of investment and the information in the Kingdom of Cambodia. I believe people interested in Cambodia’s financial status will find this post valueless. Do you prefer any of these financial instruments? And the reasons? It helps if you can answer this. 🙂


  4. Thank you for very interesting article. Im just starting my adventure with financial markets and posts like this are extremely helpful. There is so many things to learn and understand and you were able to describe basic financial instruments in clear and transparent way. Its definitely big help for all beginners, and Im looking forward for your next posts!

    1. Great thank for your comment. I will post more articles related the financial market and investment tool articles, very appreciated.

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