Securities Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Securities, written in plain English, along with examples of how it is used.
What is Securities?
(n) Securities are the documents, title deeds etc evidencing the possession rights by way of shares, bonds , debentures, mortgage rights etc held by the possessor of such documents or titles.
History and Meaning of Securities
Securities are an essential component of our financial system, as they provide a means for investors to invest their money in companies and organizations in exchange for ownership or debt obligations. Securities are essentially a form of financial investment, which means that they offer their investors a potential return on their investment, either through dividends or interest. The term "securities" was first used in the United States in the early 20th century and has since become a cornerstone of modern finance.
In general, securities represent a wide range of financial instruments, which can include stocks, bonds, and other debt and equity instruments. Typically, securities are issued by corporations, governments, financial institutions, and other organizations that need to raise capital for various purposes. In exchange for buying that security, the investor will receive a portion of ownership or a fixed stream of interest payments.
Examples of Securities
Stocks: Stocks are the most common type of securities, and they represent ownership in a company. When you purchase shares of stock, you become a part owner of that company, and your investment may increase or decrease in value depending on the success or failure of the company.
Bonds: Another common type of security is a bond. When you buy a bond, you are essentially loaning money to the organization that issued the bond, and in exchange for that loan, you will receive a fixed rate of interest payments.
Mutual Funds: Mutual funds are a type of security that consists of a group of stocks, bonds, or other securities that have been packaged together to form a single investment. By buying shares in the mutual fund, you can invest in a diversified portfolio of securities, which can help to reduce your overall risk.
Legal Terms Similar to Securities
Stocks and Shares: Stocks and shares are often used interchangeably with securities, as they both represent ownership in a company.
Bonds and Debentures: Bonds and debentures are both types of debt securities that pay a fixed rate of interest to the holder.
Derivatives: Derivatives are financial instruments whose value is derived from an underlying asset, such as a stock or commodity. They are often used for hedging and speculation purposes.