As mentioned, equities (also known as stocks or shares) are securities that afford the holders an ownership stake in the business that issued the securities. The owners of equity (shareholders) are therefore collectively the owners of the company, although they will not necessarily contribute to the day-to-day running of the company. The cash equities business essentially involves the issue and trading of shares.
Unlike fixed income securities, equities do not pay out a defined rate of interest to investors. Investors invest in equities because they believe that the business will flourish and as a result, the value of the shares will increase (as overall demand will rise for the shares), thus generating a profit for investors if and when they decide to sell their shares. They may also hope to receive healthy dividends whilst in possession of the shares, although dividends are generally distributed at businesses’ discretion.
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By Jake Schogger - City Career Series