What are Equities?

Equities are shares in a corporation. They are financial instruments that give their holders an ownership position in a corporation. Equities give their holders a proportionate claim to the profits and assets of a company, usually in the form of dividends and final distributions. However, equities are junior to the claims of all creditors and lenders, so payouts in the event of a corporate dissolution can be low to nonexistent. Thus, equities give both the risks and rewards of ownership.

Examples of Equities

Examples of equities are common stock and preferred stock. A variation is convertible bonds, which are initially not equities, but which become equities if investors convert the bonds into the common stock of the issuer.