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Investment Securities
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel
(We recommend this as work of authority.)

Generally, all classes of bonds and stocks, regardless of quality.  In the strict sense, however, INVESTMENT securities are those obligations and equities whose characteristics are distinctly or predominantly conservative.

General tests of investment securities are as follows.

  1. Security of principal, which depends upon the character of the issuer, nature of the business, type of security, class of lien, nature of the collateral pledged, protective provisions in the mortgage or indenture, and provisions for recourse in the event of default.
  2. Regularity of income, which depends upon the nature and stability of the business, and type of security.
  3. Fairness of yield, a relative factor.
  4. Efficiency and conservatism of management, an intangible factor of basic importance.
  5. Marketability, which depends on such factors as legality for investment by fiduciaries, degree of seasoning, and maintenance of active listed or unlisted markets for the issue.
  6. Investor convenience, including collateral value or acceptability as security for loans, acceptability of denomination and maturity, registration privilege, place of payment of interest and principal, exemption from taxation, and inter-changeability of denominations.
  7. Financial factors of safety, depending basically upon equities, earning power, and position in capitalization.

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