- “Matures” or “maturity,” are two terms generally used in economics that indicate the point of an investment or transaction in which the monetary amount will come through or get paid.
- The terms have different uses based on different contexts such as bonds, foreign exchange, investments, and deposits.
- Maturity is a term that is quite common in stocks, especially when discussing returns for investment.
Matures, which comes from the root word “maturity,” is used in an economic context to refer to the endpoint in the lifespan of a financial asset or transaction. After that, the said transaction or financial asset will have to be renewed. Otherwise, it will be nullified and officially considered nonexistent.
You might have heard this term already in one of your transactions in banks or insurance companies since the word is used in deposits, trading, commodity swaps, loans, bonds, and many others. Simply put, this piece of economic jargon is quite common so be prepared to hear it a lot when you dabble in investing and stocks.
Different strokes for different folks
It is important to note that maturity will have different uses depending on the specific context or transaction. It may be different for, say, foreign exchange and a bond. The maturity for foreign exchange is often used to refer to the date at which two companies of different currencies will compensate each other after the deal (this is usually two business days).
By comparison, a maturity for a bond is a deadline for the borrower to pay his lender the amount they agreed upon plus any interest they may have discussed. Failure to fulfill this maturity condition by not issuing payment to the lender will undoubtedly hurt the borrower’s reputation, as well as have a negative financial impact on the lender.
Meanwhile, for financial contexts that use deposits, maturity means the date when the payment for a loan, or principal, gets returned to the investor. The interests of said principal can then be paid off during the lifetime of the deposit, or at its mature point. Maturity can also be the point in an interest payment when the interest amount gets paid in full and has to stop.
Matures for stocks
With the above definition laid out, hearing the word “maturity” when you are investing in stocks should not be an alien word anymore. You might hear it in the context of a deposit if and when you become an investor for a particular stock and are waiting for your returns. The same thing can be said when you have your own company and are working with foreign companies where transactions will require foreign currency exchanges.
What understanding matures is quite essential when investing in stocks just because you do not want to be confused when to expect your return on investment (ROI) for a particular transaction. As usual, know when it comes to financing and economics goes a long way to keep your feet on the ground whenever you feel lost or dizzy with all the terms bouncing around.