What Are Securities?
Securities are tradable financial assets, the broad family that includes stocks, bonds, and many investment products. Owning a security gives you a financial claim, such as a slice of a company or the right to be repaid a loan. The term also carries a legal meaning that decides how an investment is regulated.
How do securities work?
The word sounds dry and legalistic, but you have almost certainly held one. Every share of stock, every bond, and every slice of a fund is a security: a financial holding you can buy and sell, whose ownership is recorded on paper or a screen rather than handed over physically. What ties them all together is that each one represents a claim, on a company, on a stream of interest, or on some other source of value.
The word groups together most of what people trade in finance, which is why it appears in names like the Securities and Exchange Commission.
What are the main types of securities?
Securities fall into a few broad buckets, each with its own behavior:
| Type | What it represents | Example |
|---|---|---|
| Equity securities | Ownership in a company | Shares of Apple |
| Debt securities | A loan you will be repaid with interest | Treasury bonds |
| Derivatives | A contract whose value comes from something else | Options |
All three are securities because each one is a tradable claim on value.
Why does the word "securities" matter?
The label is not just jargon; it is a legal classification. In the United States, if an investment counts as a security, it must follow strict disclosure and registration rules enforced by the SEC. This is why there are constant legal fights over whether new products, like certain cryptocurrencies, should be treated as securities. The answer changes what companies are allowed to do and what protections buyers receive.
The TL;DR for Securities
At a Glance
- A security is a tradable financial asset that represents a claim, such as ownership or a debt owed to you.
- The three big families are equity (stocks), debt (bonds), and derivatives.
- "Security" is also a legal term that decides how an investment is regulated.
- Most things you can invest in, from shares to bonds, are securities.