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Investment Securities

  

Categories: Investing

See: Investment Product.

More or less anything you'd invest in that is meaningful, or has scale, will be an investment security.

Stocks. Bonds. Derivatives therein. The security itself is backed by a given issuer of a bond's ability to repay...or in the case of a share, it represents a percentage ownership of the thing being bought into.

Is a piece of rare art a security? Not really. It's the thing itself that represents all the value in it, so it's just...valuable art. A call option to buy that Mona Lisa for $50 mil any time in the next year? That's an investment security.

Related or Semi-related Video

Finance: What does securitized mean?1 Views

00:00

Finance allah shmoop What does securitized mean Well it happens

00:08

when you make a security out of clay or mortgage

00:11

bonds or debt backing two hundred thirty nine airplanes Well

00:14

basically when you securitize something you're creating one large thing

00:18

out of many small things to create liquidity and broader

00:21

investment interest and flexibility and given category So think about

00:25

the most famous securitisation in history Collateralized mortgage obligations or

00:30

c M o's Where in a bunch of clever wall

00:32

street people securitized subprime or high risk mortgages created that

00:37

cmo security and then sold the crap out of it

00:40

to investors And then bad things happened when an investor

00:43

reviews one mortgage investment like a manny here Great guy

00:47

Excellent golfer manny here is a gardener He makes forty

00:50

five grand a year and now well meet His wife

00:52

has moral The substitute school teacher She makes thirty grand

00:55

a year Well they have three kids and for somehow

00:57

able to get a loan for seven hundred fifty thousand

01:00

dollars to buy this freaking amazing mansion Had one investor

01:04

looked at this transaction while they would have realized that

01:06

something was off Like how can a total family household

01:10

income of seventy five grand be able to pay ten

01:12

times that number in a mortgage Well a fudge here

01:14

Ah fudge there a teaser rate for six months a

01:17

sickly old uncle who promised to die soon and and

01:20

yeah so when loans get securitized and it usually is

01:23

loans are debt that gets securitized like this The theory

01:26

was that there'd be less volatility less risk when lots

01:30

of them were pooled together in one package But in

01:33

fact there was on ly perversely extreme incentive to write

01:36

loans from the various lending institutions writing those loans And

01:40

there was poor management and poor governance in new well

01:43

poor math and also porsche moving So the subprime mortgage

01:46

securitized behemoth blew up famously and almost destroyed the american

01:50

financial system Other things get securitized as well For example

01:54

real estate holdings get securitized and what's called a reet

01:58

or real estate investment trust which puts in tow one

02:01

investing vehicle a whole bunch of usually aligned buildings like

02:05

think a package of old age homes or a package

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of shopping malls or of office buildings or massage parlors

02:12

or whatever floats your boat well the process simply makes

02:15

one easily investable security out of lots of disconnected individual

02:19

investments and usually that's good for everyone Everyone but this 00:02:23.908 --> [endTime] guy

Up Next

Finance: What is The Securities Amendments Act Of 1975?
9 Views

The Securities Amendments Act of 1975 created a national market clearing system to standardize stock prices and transaction costs from state to state.

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