Definition: Securities are any form of ownership that can be easily traded on a secondary market, such as stocks and bonds. It also includes their derivatives, such as futures contracts, options, or mutual funds.
Securities are traded on a secondary market. This includes the stock market, bond market, and U.S. Treasuries market. Traders must be licensed to buy and sell securities to assure they are trained to follow the laws set by the Securities and Exchange Commission (SEC).
Securities traders are always trying to find ways to make a higher return with less risk. Therefore, innovative derivatives of basic stocks and bonds are often developed. These include futures contracts, and call and put options. Even mortgages have been packaged to sell on the secondary market - these are known as mortgage-backed securities.
Securities help the economy by making it easier for those with money to find those who need investment capital. By making trading easy and available to many investors, securities make markets more efficient. It is easy for investors to see which companies are doing well, and which ones are not. Money can swiftly go to those companies that are growing, thus rewarding performance and providing an incentive for further growth.
Also Known As: stocks, bonds, futures contracts, options
