Security

AAA

DEFINITION of 'Security'

A financial instrument that represents: an ownership position in a publicly-traded corporation (stock), a creditor relationship with governmental body or a corporation (bond), or rights to ownership as represented by an option. A security is a fungible, negotiable financial instrument that represents some type of financial value. The company or entity that issues the security is known as the issuer.

For example, the issuer of a bond issue may be a municipal government raising funds for a particular project. Investors of securities may be retail investors - those who buy and sell securities on their own behalf and not for an organization - and wholesale investors - financial institutions acting on behalf of clients or acting on their own account. Institutional investors include investment banks, pension funds, managed funds and insurance companies.

INVESTOPEDIA EXPLAINS 'Security'

Securities are typically divided into debt securities and equities. A debt security is a type of security that represents money that is borrowed that must be repaid, with terms that define the amount borrowed, interest rate and maturity/renewal date. Debt securities include government and corporate bonds, certificates of deposit (CDs), preferred stock and collateralized securities (such as CDOs and CMOs).

Equities represent ownership interest held by shareholders in a corporation, such as a stock. Unlike holders of debt securities who generally receive only interest and the repayment of the principal, holders of equity securities are able to profit from capital gains.

In the United States, the U.S. Securities and Exchange Commission (SEC) and other self-regulatory organizations (such as the Financial Industry Regulatory Authority) regulate the public offer and sale of securities.

RELATED TERMS
  1. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment ...
  2. Shareholder

    Any person, company or other institution that owns at least one ...
  3. Generic Securities

    A security backed by recently issued loans or mortgages. Its ...
  4. Handle

    The whole number part of a price quote. In a quote the handle ...
  5. Earnings

    The amount of profit that a company produces during a specific ...
  6. Shares

    A unit of ownership interest in a corporation or financial asset. ...
RELATED FAQS
  1. What's the difference between cash-on-delivery differ and delivery against payment?

    Cash on delivery and delivery versus payment describe different procedures and timing of payments. Cash on delivery describes ... Read Full Answer >>
  2. What companies give the purest exposure to the chemicals sector?

    Companies that exclusively produce chemical products offer the purest exposure to the chemicals sector. Purchasing chemical ... Read Full Answer >>
  3. Which commodities are the main input materials for the automotive sector?

    The automotive sector uses a wide range of materials in manufacturing. Metals such as aluminum and steel, advanced plastics ... Read Full Answer >>
  4. What are the most popular ETFs that track the aerospace sector?

    Exchange-traded funds (ETFs) are popular with investors who want a reduced-risk means of investing in a sector. ETFs lower ... Read Full Answer >>
  5. Is an earnings surprise priced into the opening value by market makers or does the ...

    An earnings surprise is an event where the earnings of a company are greater or lower than the predictions put forth by analysts, ... Read Full Answer >>
  6. What does the underlying of a derivative refer to?

    A derivative security is a financial instrument in which the price of the derivative is dependent on its underlying asset. ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Stock Basics Tutorial

    If you're new to the stock market and want the basics, this is the tutorial for you!
  2. Investing Basics

    Active Investment Management Misses The Mark

    Active investment management offers little advantage in the secondary capital markets.
  3. Options & Futures

    The 4 Ways To Buy And Sell Securities

    Know the four main avenues of buying and selling investment instruments.
  4. Mutual Funds & ETFs

    Mutual Fund Basics Tutorial

    Learn about the basics - and the pitfalls - of investing in mutual funds.
  5. Bonds & Fixed Income

    Muni Bonds, Taxable Bonds or CDs: Which is Best?

    Here's how to tell if municipal bonds are a better investment than taxable bonds or CDs.
  6. Investing Basics

    Understanding Open-End Funds

    An open-end fund is a type of mutual fund that does not limit the amount of shares it issues, but issues as many shares as investors are willing to buy.
  7. Investing Basics

    What is a Nominal Value?

    The nominal value of a security, such as a stock or bond, remains fixed for the duration of its life.
  8. Fundamental Analysis

    Calculating Future Value

    Future value is the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today.
  9. Investing

    The Strong Dollar’s (Real) Toll On Tech Stocks

    A large portion of U.S. technology companies’ sales occur overseas, given the strong international business and consumer demand from many U.S. tech firms.
  10. Stock Analysis

    Google Stock: A Tale of Two Share Classes

    Google stock comes in two different flavors with different rights for shareholders.

You May Also Like

Hot Definitions
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  2. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  3. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  4. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  5. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  6. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
Trading Center