What Is A Security?

By Samantha Baltodano

A security is a financial instrument representing ownership in a company, a debt owed by a company, or a derivative. 

In simple terms, a security is a piece of paper or digital record that represents an investment. For example, stocks, bonds, and options are all examples of securities. 

When you buy a security, you become a shareholder in the company, or you lend money to the company in exchange for a promise of future payment, or you own a right to buy or sell an underlying asset at a specified price and time.

For example, let's say you want to invest in Apple Inc. 

One way to do this is by buying shares of Apple's stock. When you buy a share of Apple stock, you become a shareholder in the company. 

This means that you own a portion of the company and have the right to vote on important company decisions, such as the election of the company's board of directors. 

As the value of the company increases, so does the value of your investment. If you hold onto your shares for a long time and the company does well, you can sell your shares for a profit. 

This is how many people invest in the stock market and grow their wealth over time.

Summary

• A security is a financial instrument representing ownership in a company, a debt owed by a company, or a derivative. 
• By investing in securities, individuals can participate in the growth of companies and potentially earn a return on their investment. 
• Understanding what a security is and how it works is an important step for anyone looking to start investing and building their wealth.



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