Financial instruments are contracts that represent an asset to one party and a liability to another. They can be classified into various categories, including equities, debt instruments, and derivatives. These instruments are essential for facilitating trade, investment, and risk management in financial markets. Investors use financial instruments to achieve their financial goals, whether it's generating income, preserving capital, or speculating on market movements. Common examples include stocks, bonds, and options. Understanding these instruments is crucial for anyone looking to navigate the complexities of the financial landscape.