FactorPad
Faster Learning Tutorials

Equity Security definition

There are several types of equity securities, but common stock is by far the most prevalent and well known. It offers ownership in a company.
  1. Define - Define equity securities.
  2. Context - Use equity security in a sentence.
  3. Quiz - Test your knowledge.
by Paul Alan Davis, CFA, July 16, 2016
Updated: December 31, 2018
Equity securities normally come with higher risk than debt securities. See what else they come with.

Outline Back Next

~/ home  / finance  / glossary  / equity security


Equity Security

Beginner

An Equity Security is an investment in the equity or ownership side of a business. It is typically a variable investment, meaning an investor may face a loss of principal. In the event of bankruptcy, Equity Securities are given lower priority than Debt Securities.

The investor in an Equity Security is normally interested more in the growth of capital than in a stream of income, like dividends.

Equity Security prices are sensitive to the business cycle and the forward-looking prospects of the firm.

Synonym: stock, equities

In a Sentence

Doc:  Think of an equity security  like the ownership of a home.
Lia:  So brokerage firms offering margin are like mortgage lenders?

Video

Many terms have 4-5 minute videos showing a derivation and explanation. If this term had one, it would appear here.

Videos can also be accessed from our YouTube Channel.

Video Script

If this term had a video, the script would be here.

Quiz

Click box for answer.

Long investors in an equity security can lose more than 100% on their investment. | True or False?

False, unless they invested with margin.

Questions or Comments?

Still unclear on Equity Security? Try out the course Quant 101.

Related Terms

Our trained humans found other terms in the category investment vehicles you may find helpful.


What's Next?

Subscribe if you'd like to be notified about new video content.

  • To see all terms in the Glossary, click Outline.
  • For a little portfolio theory and the efficient frontier, click Back.
  • To learn about expected return on investments, click Next.

Outline Back Next

~/ home  / finance  / glossary  / equity security



 
 
Keywords:
equity security
equity investment
stock investment
investment ownership
common stock
investing in stocks
stock market
how to invest in stock market
stock market investment
equity fund
equity capital
investment options
equity participation
owners equity
investment funds
investing
long term investment
investing for beginners
company equity
equity shares
investment funds
equity mutual funds
company equity investment
investment modeling