Equities Definition – What is Equities? | CFI VU


Equities, in the simplest terms, can be described as shares in the ownership of a company.


Equities, along with [bonds], are the most common means by which a company will raise finance from the markets. However, they differ from bonds, which are loans made to the company and do not constitute any ownership of the company at all, as a company will offer shares to investors which, in turn, give the buyer of the shares (the investor or trader) part ownership of the company.


Equities are listed on global stock markets and traded worldwide in the secondary market after they have been issued/sold by companies. There are millions of equities listed on [stock exchanges] worldwide including the FTSE in the UK, the Dow Jones and S&P 500 in the US, the CAC 40 in France, and the Nikkei 225in Japan to name just a few. Multi-national companies may even be listed on multiple stock exchanges, issuing equities in different currency denominations globally.


Investors, more often than not, buy equities as longer-term investments, hoping that the price of the stock will rise over several years. Commonly, equity investments are made as part of a diversified portfolio to help with long-term financial plans, such as retirement plans.


Investors will, however, receive dividends on the stock they hold. Companies usually make dividend payments on an annual, but sometimes quarterly or bi-annual basis. The dividend will be based on company profits, and a specific amount per share will be allocated.


As an example, company X may announce an annual dividend of £1.50 per share, and if investor x owns 1,000 shares of the company, they will receive £1,500 (1,000 x £1.50) as a dividend payment.


While investors will seek the longer-term investment, traders may look to buy or sell equities over short-term periods looking for quick movements in price which may occur as a result of several factors.


For example, a company could be set to release annual or quarterly profit figures which a trader believes are likely to be weak. Therefore, the trader may sell the equities of the company ([go short]) in the hope that the price will drop relatively quickly over a short period and they will then be able to buy the shares back at a cheaper price and bank good profits.


Conversely, a company may land a big contract and a trader may quickly buy ([go long]) some stock in the company expecting that the will price rise sharply over the coming days as news of the contract disseminates and demand for the company’s shares increase, after which the trader can then sell at a higher price and again bank some profits.


Key takeaways 


  • Equities, in their simplest form, give the holder part ownership of the company issuing the equity.
  • Companies may issue equities in various currencies on different stock exchanges around the world.
  • Investors will often invest in equities for longer-term periods as part of a diversified investment portfolio.
  • Traders may take shorter equity trades, hoping to take profits after specific news events involving companies.


CFI Financial Group is an award winning global financial markets provider with over 23 years of experience and regulated entities in several jurisdictions, focused on offering impeccable execution and trading conditions including very low spreads, professional services, dedicated support and powerful tools.
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Important Disclaimer:

We would like to remind that while we endeavour to provide best possible services, Credit Financier Invest Limited provides execution only services and any information, reports, opinions, commentary or other materials he receives from CFI directly or from its employees or through any analytical tools provided to him or third party research provided to him from the Company shall not be deemed as investment advice and it cannot be relied upon to make investment decisions. The Client commits to make his own research and from external sources as well to make any investment. The Client accepts that CFI will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. The contents of any report provided should not be construed as an express or implied promise, as a guarantee or implication that clients will profit from the strategies herein, or as a guarantee that losses in connection therewith can, or will be limited.

Forex and CFDs are leveraged products that incur a high level of risk and a small adverse market movement may expose the client to lose the entire invested capital. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. The possibility exists that you could sustain a loss in excess of your deposited funds even if a stop loss is used and therefore, you should not speculate with capital that you cannot afford to lose and be aware of trading risks. Credit Financier Invest Limited provides general information that does not take into account your objectives, financial situation or needs. The content of this website must not be interpreted as personal advice. Please ensure that you understand the risks involved and seek independent advice if necessary.

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