Stocks and equities refer to ownership stakes in companies, but there are slight differences between the two terms.
- Stocks: Stocks, also known as common stocks or shares, represent ownership in a specific company. When an investor owns a stock, they become a partial owner of the company and hold a claim to its assets and earnings. Stockholders typically have voting rights and may benefit from dividends when the company distributes profits. Stocks can be bought and sold on stock exchanges or through over-the-counter markets.
- Equities: Equities have a broader meaning and encompass various types of ownership interests. While stocks are a form of equities, other equity instruments include preferred stocks, warrants, limited partnership units, and equity options. Preferred stocks, for instance, represent ownership with specific features such as higher priority in dividend payments or higher claim on assets during liquidation. Equities, therefore, cover a wider range than stocks alone.
In summary, while stocks specifically denote ownership in a company, equities represent a broader category of ownership interests, which include various instruments beyond common stocks.