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Economic Definition of investment security. Defined.

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Term investment security Definition: One of several types of financial assets held by banks that provides a buffer between reserves and customer loans. Two of the more common investment securities are federal funds, loans made to other banks, and U.S. Treasury securities, used to finance the federal deficit. Investment securities are more liquid than customer loans, which means they can be quickly converted to reserves if needed to conduct daily transactions. But unlike legal reserves, investment securities generate interest revenue, although not as much as customer loans. Investment securities provide a nice balance between the profit of loans and the safekeeping of reserves.

 

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