Investors have a wide range of options and choices for their investment dollars. The choices of stocks, bonds, real estate and other investments all have different results and levels of safety. "Securities" is a general term for many types of investments. Understanding the terminology makes investing easier.
Stock shares are ownership in a corporation. They are an equity type of security. Stock ownership gives the investor the right to vote on corporate resolutions and is a claim against company assets. Stocks trade on organized stock exchanges like the New York Stock Exchange and the Nasdaq.
Securities can be broadly classified as ownership securities, debt securities or derivative securities. Stocks are ownership securities. Debt securities are bonds and notes. Derivatives are securities that derive their value from the price changes of other securities or commodities.
New investors should consider each type of security separately in an overall investment plan. The term "security" is too broad to have any meaning for investment planning. Most investors want to have a combination of stocks, bonds and cash in their investment portfolio. The breakdown of different securities in the portfolio is determined by the investor's risk tolerance, age, portfolio size and investment goals.
The number of different securities available to investors is very large. There are more than 6,000 individual stocks, 8,000 mutual funds and numerous government, municipal and corporate bond issues. An investor should do her own research about any individual security or stock before investing.
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