Question

What differentiates an ordinary investment from a security since we are discussing finance? List all the factors. I'm a newbie on your board and struggling what are the differences. Can you help me understand?

Answer 1

Security is a kind of negotiable instrument which posses certain monetary value, it can either be traded publicly or not be. Usually the shares and debt issued by a public company is known as security in the market. The main difference between investment in a security and an ordinary investment is the way it is regulated. A security is usually traded at a public exchange and can be bought and sold easily thus allowing easy convertibility of security into cash, while an ordinary investments in other assets like gold, jewellery, real estate etc. are not properly regulated and their convertibility is also difficult. Thus, investment in a security is a more organized form of investment as compared to other ordinary investments. Securities can be of different types but there are mainly two type of security debt and equity. Debt securities are debt issued by companies and subscribed by people or banks and institutions, and same is the case with equity. Ordinary investments are usually purchased manually and involves lot of paperwork, while a security can be bought and sold even through internet by placing orders through brokers. Thus, there is more flexibility with investment in securities as compared to ordinary investments.