Securities
Definition
Securities are tradable financial instruments that represent an ownership position (in the case of stocks), a creditor relationship (as with bonds), or rights to ownership (as with options or derivatives). They are typically issued by corporations, governments, or other entities to raise capital and are bought and sold on public or private markets.
Why It Matters to Investors
- Securities are the primary building blocks of investment portfolios.
- They offer investors access to income (through interest or dividends), capital appreciation, or hedging strategies.
- Understanding the type, structure, and risk profile of various securities is essential for making informed investment decisions.
- They are also subject to regulatory oversight, which can affect availability, liquidity, and investor protections.
The TiltFolio View
Both TiltFolio systems are built entirely from publicly traded securities, including equities, bonds, and other liquid instruments. Both systems avoid opaque or illiquid securities such as hedge fund shares or private placements. This ensures transparency, tradability, and real-world implementability. Neither system uses derivative-based securities or structured products, preferring simplicity, liquidity, and direct exposure.
TiltFolio Adaptive rotates between different securities based on trend and volatility signals, while TiltFolio Balanced maintains consistent exposure to specific securities (IEF, TLT, SPY, GLD) as part of its diversified allocation. Both systems prioritize liquid, transparent securities that can be traded efficiently without significant market impact.
Real-World Application
• A share of Apple stock is an equity security that gives the investor partial ownership of the company.
• A U.S. Treasury bond is a debt security entitling the holder to regular interest payments and repayment of principal.
• Exchange-traded funds (ETFs) are pooled investment securities that offer diversified exposure to a basket of underlying assets.
• Derivatives like options and futures are also considered securities, though they involve more complexity and risk.