Securities are financial instruments that represent some type of financial value, usually in the form of a stock, bond, or option. Securities can be broadly categorized into two distinct types: equities and debts. However, some hybrid securities combine elements of both equities and debts. Equity securities represent ownership interest held by shareholders in an entity, realized in the form of shares of capital stock, which includes shares of both common and preferred stock. Debt securities, also called fixed-income securities, generally refer to bonds, and they are investments in debt. When you buy a debt security, you are essentially lending money to a company or government entity. In return, you get periodic fixed-interest payments.
The entity that creates the securities for sale is known as the issuer, and those who buy them are investors. Generally, securities represent an investment and a means by which municipalities, companies, and other commercial enterprises can raise new capital. Companies can generate a lot of money when they go public, selling stock in an initial public offering (IPO), for example. Securities are heavily regulated in the United States by the Securities Exchange Commission (SEC) .
In summary, securities are a broad category of financial instruments that hold value and can be traded between parties. They include stocks, bonds, mutual funds, exchange-traded funds, or other types of investments you can buy or sell.
