In finance, a security is a tradable financial asset that holds some type of monetary value. The term "security" refers to a wide array of investments, such as stocks, bonds, notes, debentures, limited partnership interests, oil and gas interests, and investment contracts. The legal definition of a security varies by jurisdiction, but generally, if an investment of money is made in a business with the expectation of a profit to come through the efforts of someone other than the investor, it is considered a security.
Securities can be broadly categorized into equity securities, such as stocks, and debt securities, such as bonds and debentures. An asset-backed security represents a part of a large basket of similar assets, such as loans, leases, credit card debts, mortgages, or anything else that generates income. Marketable securities are any type of stock, bond, or other security that can easily be bought or sold on a public exchange.
It is important to note that the definition of a security can be much broader than just stocks or bonds. For example, promissory notes, LLC interests, and oil and gas partnerships can also be considered securities. The sale of securities to investors is one of the primary ways that publicly-traded companies drive new capital for operations. The Securities and Exchange Commission (SEC) oversees securities transactions, activities of financial professionals, and mutual fund trading to prevent fraud and intentional deception in the United States.
