The Difference Between Stocks & Securities

by Tim Plaehn ; Updated July 27, 2017
Stocks are one type of security.

Investors have a wide range of options and choices for their investment dollars. The choices of stocks, bonds, real estate and other investments all have different results and levels of safety. "Securities" is a general term for many types of investments. Understanding the terminology makes investing easier.

A security is any investment that can be readily transferred or sold for cash. Stocks are one form of security, as are bonds, notes, mineral royalties, options and futures contracts. Most forms of securities trade on an organized exchange or secondary market. There is no difference between a stock and securities because stock shares are one type of security.

Function

Stock shares are ownership in a corporation. They are an equity type of security. Stock ownership gives the investor the right to vote on corporate resolutions and is a claim against company assets. Stocks trade on organized stock exchanges like the New York Stock Exchange and the Nasdaq.

Types

Securities can be broadly classified as ownership securities, debt securities or derivative securities. Stocks are ownership securities. Debt securities are bonds and notes. Derivatives are securities that derive their value from the price changes of other securities or commodities.

Considerations

New investors should consider each type of security separately in an overall investment plan. The term "security" is too broad to have any meaning for investment planning. Most investors want to have a combination of stocks, bonds and cash in their investment portfolio. The breakdown of different securities in the portfolio is determined by the investor's risk tolerance, age, portfolio size and investment goals.

Warning

The number of different securities available to investors is very large. There are more than 6,000 individual stocks, 8,000 mutual funds and numerous government, municipal and corporate bond issues. An investor should do her own research about any individual security or stock before investing.

About the Author

Tim Plaehn has been writing financial, investment and trading articles and blogs since 2007. His work has appeared online at Seeking Alpha, Marketwatch.com and various other websites. Plaehn has a bachelor's degree in mathematics from the U.S. Air Force Academy.

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