There is a richness yet confusing aspect to the English language where words have different meanings depending on the context. It is why context is so important.
Financial security is a concept while financial securities are tradable financial assets. However, if you are referring to only a single tradable financial asset, then it becomes a financial security.
You can be content and financially secure without having the contents of a high-performing portfolio of financial securities.
Financial security is good but financial securities are the goods that will help you make that happen.
A high-performing financial security like a stock can become a spectacle but you may need spectacles to actually read the fine print on owning shares of that stock.
The manner in which people become financially secure differs for everyone but is not considered good manners to ask other people how to do it, other than a financial advisor.
There is a custom not to talk about money and financial securities but if you are in possession of $10,000 or more entering or leaving the United States you will need to declare that in customs.
Building financial security can be character building especially when learning how to avoid charlatans and characters called the bogeyman.
The exact definition of a financial security can vary depending on the jurisdiction where it’s being traded. In the United States, a financial security is a tradable asset that represents monetary value and can be a claim on future earnings or assets.
The term ‘security’ covers a wide range of financial instruments that can be grouped into three main categories:
• Equity securities (stocks)
• Debt securities (government and corporate bonds)
• Derivatives (options and futures).
Just like different groups of musical instruments that when combined create a band or orchestra, the same concept applies to financial instruments that when combined create a portfolio.
Financial securities and financial vehicles, however, are not the same. Even I was unsure how these corresponded. Financial vehicles are broader tools or products that serve as a “container” that houses various securities. This allows investors to diversify their portfolios. Examples of financial vehicles include mutual funds, exchange-traded funds (ETFs), indexed funds and annuities.
Another way to think of it is that securities are the actual investments and vehicles are the structures that hold and offer those investments to the public.
Securities are traded in both public and private financial markets. The Securities and Exchange Commission often referred to as the SEC regulates the issuance, trading and sale of securities. The purpose of the SEC is to enhance transparency, protect investors and prevent fraud in the financial markets.
The featured image is my favorite musical instrument. Having moved so many times, it would’ve been more practical to keep my clarinet but playing solo piano is far more rewarding. Here it makes sense to hold only one musical instrument where it rarely make sense to hold only one financial instrument.
And if you are wondering what that hexagonal object is plugged into the outlet, I’ll add more context on that and the other type of security next week.