What Is A Security?

There are several answers to the question "what is a security?" The "Howey test" is often used to define securities as investment contracts in which a person invests money in a common enterprise and is led to expect profits solely from the efforts of others.

Securities Are Passive Income. When you invest in stocks or bonds, you get a residual income stream that lasts for as long as you hold the security (dividends in the case of stocks; interest in the case of bonds).

You also purposely expose yourself to investment risk in hopes that these securities will soar in value and you can cash out at a profit.

Unless you actually work for the issuing company, that is the extent of your active involvement in your investment.

Active vs. Passive Income. The most efficient way to create income is to do it actively. Although the stock market is a proven investment vehicle for some of your money, your income from passive investments will not reflect your own contribution to society and therefore will not be an efficient way to realize your full income potential.

Securities and the Collective Consciousness. When you invest in securities, you are trusting that someone else is communicating with the collective consciousness for you, instead of doing this for yourself.

Just as if you were an employee of the company instead of a stockholder, your income stream will be dependent on the business -- only their societal value and their ability to compete will matter. These are things over which you have no control.

That's fine for some of your free money but not all of it. We can certainly profit from stock investments. There are many bright and innovative people running public companies all over the world who are maximizing their company’s potential.

But not all of them are smarter than you are. And you wouldn’t know which ones are and which ones aren’t before you invest.

Next: Are Stock Market Predictions Possible?

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