Investment Securities - Introduction

The investment world is divided into owners (those who invest in equities, or stocks) and loaners (those who invest in debt, or bonds). Owning equity in a company is perhaps the most common and widely accessible means by which investors meet their financial objectives. Individual investors become owners of a publicly-traded company by purchasing stock in that company; by doing this, they can participate in the company's growth over time.

Investors may also choose to loan money to companies, governments or municipalities in return for regular interest payments and the eventual return of their principal at a given date in the future. They can purchase Treasuries from the U.S. government for safekeeping, municipal bonds from state or local municipalities across the country (or even as far away as Guam) to save taxes, or corporate bonds from a multitude of companies to provide a regular stream of income payments for retirement. Investment companies also buy these securities, albeit in greater quantities than the individual investor, to make up their mutual funds, which may appear in a variable annuity.

You may not know it, but when you keep your money in a money market account, you are actually lending your money in return for interest. The interest is small compared to other types of loans and you get your principal back very quickly, but you are still lending money.

The three basic types of investment securities are money market, debt (bonds) and equities (stock). Each of these is detailed in the sections below. Another way to classify securities is by the type of issuer. Corporations can issue both stocks and bonds. Governments (such as federal, state or municipalities) can issue either money markets or debt securities.

Corporate Bonds
Related Articles
  1. FA

    The Basics of The Series 79 Exam

    Passing the Series 79 exam is usually necessary for anyone who wants to work in investment banking.
  2. Your Clients

    Events in 2016 That'll Alter Your Retirement Plans

    Retirement savers who are trying to see what lies ahead can expect these changes affecting their retirement plans in 2016.
  3. Term

    What is the Series 66?

    The Series 66 exam is one of two tests required to register as both a securities agent and an investment advisor.
  4. Your Practice

    How Likely is a New Fiduciary Rule in 2016?

    New fiduciary standards for advisors working with retirement accounts are on the horizon. Will they become reality in 2016?
  5. Professionals

    Breaking Down Financial Securities Licenses

    Find out which exam you need to begin your career as an investment professional.
  6. Brokers

    Duck These Illegal Sales Tactics Used By Brokers

    Many unscrupulous brokers employ illegal swindling tactics to sell bad securities. Here are sales strategies that should indicate red flags to investors.
  7. Professionals

    Private Banker: Career Path & Qualifications

    Discover what kind of work private bankers do, and learn more about how you can develop the experience and qualifications required to work in the field.
  8. Financial Advisors

    Top Compliance Headaches for Financial Advisors

    Advisors who do not devote sufficient attention to compliance issues can find themselves in hot water with both regulators and their clients.
  9. Investing Basics

    How To Handle A Serious Dispute With Your Broker

    Find out what to do if you have a dispute with your broker.
  10. Professionals

    Hedge Funds and the Law

    Learn how hedge funds have gotten in trouble for illegal insider trading. Read about questionable high-frequency trading (HFT) strategies.
RELATED TERMS
  1. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin ...
  2. Series 6

    A securities license entitling the holder to register as a limited ...
  3. Comprehensive Automated Risk Data ...

    The Comprehensive Automated Risk Data System (CARDS) is an initiative ...
  4. Corporate Financing Committee

    A regulatory group that reviews documentation that is submitted ...
  5. Series 79

    A examination to ensure a candidate is qualified to become a ...
  6. Research Analyst

    A person who prepares investigative reports on equity securities. ...
RELATED FAQS
  1. Are hedge funds regulated by FINRA?

    Alternative investment vehicles such as hedge funds offer investors a wider range of possibilities due to certain exceptions ... Read Full Answer >>
  2. How are variable annuities regulated?

    The sale of a variable annuity is regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory ... Read Full Answer >>
  3. Do financial advisors need to pass the Series 7 exam?

    The exact nature of a financial advisor's job responsibilities determines whether he must have a Series 7 license. If a financial ... Read Full Answer >>
  4. Is a financial advisor required to have a degree?

    Financial advisors are not required to have university degrees. However, they are required to pass certain exams administered ... Read Full Answer >>
  5. Do financial advisors need to be approved by FINRA?

    The term "financial advisor" can refer to a couple of different roles. It most often refers to a broker-dealer or an investment ... Read Full Answer >>
  6. How does a broker decide which customers are eligible to open a margin account?

    Brokers have the sole discretion to determine which customers may open margin accounts with them, although there are regulations ... Read Full Answer >>
Hot Definitions
  1. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  2. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  3. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  4. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  5. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  6. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
Trading Center