what are investment securities 
investment securities are a category of securities tradable financial assets such as equities or fixed income instruments that are purchased with the intention of holding them for investment as opposed to investment securities in general securities are purchased by a broker dealer or other intermediary for quick resale investment securities are subject to governance via article 8 of the uniform commercial code ucc understanding investment securitiesbanks often purchase marketable securities to hold in their portfolios these are usually one of two main sources of revenue along with loans investment securities can be found on the balance sheet assets of many banks carried at amortized book value defined as the original cost less amortization until the present date the main difference between loans and investment securities is that loans are generally acquired through a process of direct negotiation between the borrower and lender while the acquisition of investment securities is typically through a third party broker or dealer investment securities at banks are subject to capital restrictions for example the number of type ii securities or securities issued by a state government is restricted to 10 of the bank s overall capital and surplus investment securities provide banks with the advantage of liquidity in addition to the profits from realized capital gains when these are sold if they are investment grade these investment securities are often able to help banks meet their pledge requirements for government deposits in this instance investment securities can be viewed as collateral types of investment securitiesas with all securities investment securities held by banks as collateral can take the form of equity ownership stakes in corporations or debt securities equity stakes can be in the form of preferred or common shares although it is critical that they provide a measure of safety in this case high risk high reward securities such as initial public offering ipo allocations or small gap growth companies might not be appropriate for investment securities some companies offer dual class stock which provide distinct voting rights and dividend payments debt securities can take the common forms of secured or unsecured corporate debentures secured corporate debentures can be backed by company assets such as a mortgage or company equipment in this scenario secured debt also called investment grade would be preferred treasury bonds or treasury bills and municipal bonds state county municipal issues are also options for a bank s investment securities portfolio again these bonds should be investment grade while securities in general include derivative securities such as mortgage backed securities whose value is derived from the asset s underlying the financial instrument these are higher risk and not often encouraged to be part of a bank s investment securities portfolio other types of investment securities can include money market securities for quick conversion to cash these generally take the form of commercial paper unsecured short term corporate debt that matures in 270 days or less repurchase agreements negotiable certificates of deposit cds bankers acceptances and or federal funds 