Securities
What are securities?
The world's full of financial bits of paper (or their digital equivalents) of which a security is a special type.
It has two key features:
1) it gives rights to the person who owns it, and
2) it can be traded.
Where have you heard about securities?
Shares are often referred to as securities, particularly in the USA. Whenever a scandal breaks on Wall Street, you'll probably hear that the Securities & Exchange Commission has swung into action.
Share traders are also called financial securities dealers, and you'll have seen money-advice columns recommend 'investment-grade securities' – that is, top-notch investments.
What you need to know about securities...
The first thing you need to know is that they are not always very secure.
Stocks, which give you the right to a share in both the company's income and its control, are a type of security. That company could prosper, or it could fail. The same is true of corporate bonds, which give rights only to income. Derivatives also qualify as securities, and can be volatile.
Government bonds, on the other hand, are generally considered safer, but that means they pay meaner returns to investors.
Other examples include mortgage-backed securities and those secured on rental income – again, they carry rights for the owner and can be traded.