You have heard the term and know it has something to do with the stock market, but what exactly are equities? If you evaluate the term itself, you would think it has something to do with what is just and fair…or perhaps it would represent the value of something, assuming the base of the word equity. If you were to assume this, you would be completely off track. In fact, the term has nothing to do either of those.

Typically, the term equities is used interchangeably with the term shares, representing stock in a corporation.

That is a lot less complicated than you thought it would be, isn’t it?

Basically, when you buy stocks, on the stock market or in the private sector, you are purchasing pieces of a company. This is typically done to raise capital for the corporation, for expansion or just to provide financial flexibility. These pieces are referred to as shares, or less commonly equities. As you actually own a portion of the company, you are entitled to its profits when they are (hopefully) made. These are paid out in the form of dividends. The great part about stock purchases is, while you are entitled to their profits, when it comes to their losses you can only lose what you invest in the company. So, it is like owning your own business (or at least part of it), without the day to day hassles or personal financial responsibility.

Unfortunately, with stocks you quite possibly can lose all of the money you invest into it. However, the stock market has proven to provide great growth on a long term basis, even though it fluctuates on a daily.

So…you learn something new everyday. The term equities is just a confusing bait and switch which means shares. No one ever said the investment world was without its mockeries.

What Exactly Are Equities