Investment securities are any type of investments that are purchased with the intention of holding onto the securities for the purposes of generating revenue. This is in contrast to securities that are bought with the intent to resell the investments within a short period of time. The idea is to acquire securities that are capable of providing some sort of steady return that can be used as a source of income for business operations or similar purposes.
One of the most common examples of investment securities is found with commercial and investment banks. Along with the revenue generated from loans, securities of this type typically constitute one of the main sources of revenue that is used to fund the ongoing operation of the institution. This means that not every type of investment opportunity is ideal for this purpose, since some investments are not capable of generating a consistent return that is considered within an acceptable range. This means that investment banks that are looking to acquire investment securities will tend to steer clear of securities that carry a level of volatility outside of what the institution considers an acceptable range.
Investment securities are selected based on their ability to generate an ongoing source of revenue that the investment bank can utilize for funding the day to day operations of the bank, such as providing cash to customers and writing new loans. The exact nature of the assets used for this purpose will vary, depending on the condition of the marketplace. In many nations, holdings of this type are considered acceptable as collateral for any type of business deal that the bank engages in, since the assets do have a proven value and a record of generating returns.
There are several common examples of investment securities that just about any investment bank will include in an investment portfolio. Government-issued securities such as bonds are often considered ideal for this type of investment strategy. Along with the government-issued bonds, an investment bank would also consider any type of debt securities issued by national, state or even municipal government entities to be worthy of consideration. Generally, corporate securities are not held as a means of generating steady returns that are used as operating income. In some nations, there are laws that prevent investment banks from making investments in any equity securities that are associated with non-financial businesses, creating a situation where banks often invest in other banks as a means of generating an ongoing revenue stream.
