What is a Security?

Investopedia defines the term “security” as follows:

A financial instrument that represents: an ownership position in a publicly-traded corporation (stock), a creditor relationship with governmental body or a corporation (bond), or rights to ownership as represented by an option. A security is a fungible, negotiable financial instrument that represents some type of financial value. The company or entity that issues the security is known as the issuer.

For example, the issuer of a bond issue may be a municipal government raising funds for a particular project. Investors of securities may be retail investors – those who buy and sell securities on their own behalf and not for an organization – and wholesale investors – financial institutions acting on behalf of clients or acting on their own account. Institutional investors include investment banks, pension funds, managed funds and insurance companies.

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