A security is a document that certifies a right and is tradable.
These can be different types of assets, such as shares, bonds or fund units. Owning a security means that one has a claim against an issuer who has issued the security. The owner of a security thus has a right to payment of dividends, interest or other income as well as to a repayment of the invested capital at the agreed time or when the security is sold.
Securities can be traded on stock exchanges or over-the-counter. The price of a security is determined by supply and demand and can change constantly. Some securities, such as shares, are issued by companies to raise capital. Other securities, such as bonds, are issued by issuers to finance themselves. Fund shares, on the other hand, represent interests in a pool of assets managed by a fund manager.
Securities offer investors various advantages, such as the opportunity to benefit from dividend payments or price increases. However, they are also associated with risks, such as price fluctuations or a possible default of the issuer. Therefore, it is important to inform oneself about the respective opportunities and risks before investing in securities and to develop a well thought-out investment strategy.
