Equity represents ownership in a company, where investors hold shares and have a claim on the company’s profits and assets.
Equity refers to the ownership stake that shareholders have in a company. When you buy equity shares (stocks), you become a part-owner of the business and are entitled to a share of its profits, usually in the form of dividends or capital appreciation.
Equity can also refer to the residual interest in a company after deducting liabilities from assets, as shown in the balance sheet:
Equity = Assets − Liabilities
Key features of equity:
Equity is widely used for wealth creation over the long term and is a core component of investment portfolios.
"If you buy shares of a company listed on the stock exchange, you own a part of that company. If the company grows, the value of your shares increases."