Managing your securities allows you the option to use any of various multiple systems. On top of the list of choices are physical certificates and book entry. But which is the best among all the choices? Knowing how these top two systems differ and what advantages each provides will help you make a well-informed decision as to which fits your particular requirements the most.
Physical certificates consist of paper stock and bond certificates that serve as proof of your possession of the securities in your name or company. Such certificates require you to pay a fee for their issuance, including a replacement fee in case you lose the document or it is stolen. Considering that these documents are valuable, like land titles, these physical certificates must be kept safely in secure places for the opportune time when you can trade them.
Physical certificates offer certain traditional advantages. They put you in a position to become the point-person to be contacted for all company reports and information. Moreover, such documents are handy instruments you can use or submit as collaterals for a loan application.
On the other hand, the book entry system allows electronic storage of your securities; hence, removing the use of paper certificates. In addition, this system removes the possibility of loss or pilferage, unlike physical certificates. This digital storage system also simplifies the process of trading the securities, whether through sales or transfer. The complex and tedious task of preparing and mailing documents is removed through this modern digital process.
Have you made the final choice so far? If not, take more time to study your options. In spite of the apparent desirability of the book entry system because of the greater convenience and safety it provides, you may want to inquire from your transfer agent about the real benefits of the two systems and how they will enhance your specific financial needs.