Understanding Securities

In investment terms, a security is an asset that can be traded. The security has value because it represents:

  • Ownership in a company (shares/stock),
  • A loan made to a government or public corporation (bonds), or
  • The right to buy or sell other assets or securities in the future (options).

For an asset to be considered a security, it must also be interchangeable with the same amount of the same security, regardless as to who owns it. This simply means that if John owns 100 common shares of ABC Company, it will be worth the same as Jill’s 100 common shares of ABC Company.