Securities have monetary value, and you can buy, sell, or exchange them. But they’re not physical (or “tangible”) things, like houses or cars. Instead, they have value because the owner of the securities is entitled to some kind of financial claim.
Securities can include:
But ultimately, essentially all securities boil down to one of two types of claims: equity or debt.
|What it is||An ownership stake||A loan|
|Examples||Stocks, private equity, mutual funds and ETFs that own stocks||Bonds, CDs, Treasury bills|
|How earns a return||Investor (i.e., the owner) hopes to sell their stake for more than they paid; may also receive dividends over time||Investor (i.e., the lender) receives interest and principal payments|
|Risk||Usually higher||Usually lower|
You can further divide securities into two categories:
Investing in securities comes with risk, but you can also reap big rewards.
|Let your money work for you||Possible to lose your entire investment|
|Benefit from a growing economy||Economies run in cycles, and there’s always a dip out there|
|Can help protect your money against inflation||Can be complicated and require extensive research|
Securities are stocks, bonds, and other types of investments that have value and that you can buy and sell. Unlike real estate, cars, or jewelry, securities aren’t physical (or “tangible”) items. You can classify most securities as either equity or debt and as either marketable or nonmarketable.