Finance: What are Securities?

What are securities? Using the word securities is just a fancy way to say investments, for the most part. These particular investments include stock/stock options and bonds.

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Transcript

00:30

you see in the beginning of security? well it's not there by accident, so

00:35

financially speaking a security secures money. or at least value. when you buy a [100 dollar bill]

00:42

security, you give money to someone or something like a corporation. and in

00:47

return you get a promise of some value. securities come in two flavors generally

00:52

the first is equity ,or ownership. a share of stock is a security entitling you to

00:57

whatever percentage ownership and that company the share represents. like if you

01:02

bought 500 shares in a company with ten million shares outstanding well that

01:06

security represents ownership of five hundred divided by ten million or point [pie chart]

01:12

zero zero zero zero five percent of the company.

01:17

so that's equity. there's also debt as a security. that's the second thing. like

01:21

bonds the bond that Apple offered at four percent yield that pays off in ten

01:26

years? yeah that's a bond security. and note [woman sits behind computer]

01:28

that securities can carry different guarantees. that is the underlying

01:32

promise that the security represents or secures different elements. like a senior

01:38

bond security secures that those bonds will be paid off ahead of junior bonds

01:44

which will be paid off before say subordinated junior debentures. so you

01:49

can see that there are multiple classes and flavors and types of securities all

01:54

falling under this tent, which fortunately for everyone doesn't smell

01:58

like it's been sucked for four years. good grief. come back next [Linus holds his blankie]

02:02

time for another finance lesson a la shmoop and hopefully he'll have washed

02:07

this thing by then.