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Simple English definitions for legal terms
investment security
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A quick definition of investment security:
An investment security is something that you can buy that shows you have a right to something else, like a company or government's money. It can be a piece of paper that says you own part of a company (like a stock) or that someone owes you money (like a bond). It's called a security because it helps keep your investment safe and secure. But, it's important to remember that the value of a security depends on how well the company or government is doing, and how much other people are willing to pay for it.
A more thorough explanation:
An investment security is a type of financial instrument that represents ownership or creditor rights in a company or government entity. It is a way for investors to invest in a common enterprise without direct participation in it.
Examples of investment securities include:
- Stocks: These represent ownership in a company and give the holder the right to vote on company decisions.
- Bonds: These represent a loan to a company or government entity and pay interest to the holder.
- Options: These give the holder the right to buy or sell a security at a certain price.
Investment securities have no intrinsic value on their own and their value depends on the financial condition and future prospects of the entity that issued them. For example, the value of a stock depends on the profitability and future prospects of the company it represents.