What does equity mean?

Equity represents the value that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company's debts were paid off. We can also think of equity as a degree of residual ownership in a firm or asset after subtracting all debts associated with that asset.

What is the difference between equities and bonds?

The term equity has a different definition, depending on the context. When talking about the stock market, equities are simply shares in the ownership of a company. So when a company offers equities, it’s selling partial ownership in the company. On the other hand, when a company issues bonds, it’s taking loans from buyers.

Should you own equities?

If you own equities, the value of your holdings increases when the shares you own become worth more than what you paid for them. But that’s not the only way you can come out on top by owning equities. For example, companies pay dividends out of their own profits and into the pockets of their shareholders.