Question

What differentiates an ordinary investment from a security

Answer 1

A security in the securities market is controlled and regulated by a institution like SEC etc. which makes securities more comfortable, less risky and easily convertible investment as compared to other ordinary investments which may not be necessarily managed and regulated by an institution. Some of the examples of ordinary investments can be investments in Real Estate, jewellery, investment in commodities etc. these kinds of investments are not regulated and it is not organized form of investing. A security in a security market can be converted into cash very easily. However, such is not the case with ordinary investment. A security is a negotiable instrument and it posses certain monetary value in itself. Securities can be both debt and equity. Debt securities are available in debt market while securities with a bit more risk is called equity and is available in equity market. Purchasing a security now a days will not result in large paperwork and can be bought and sold online. While any other ordinary investment may require cumbersome paperwork etc.Therefore, to conclude, it can be said that security is different from an ordinary investment due to various factors that are discussed above.