In everyday use, stocks and equities describe the same thing: an ownership stake in a company that's publicly traded on a stock exchange.
Technically, though, stocks are a specific type of equity, and equities is the broader umbrella term that can also cover mutual funds and exchange-traded funds, as well as private ownership stakes that never trade on a public exchange.
Every stock is an equity, but not every equity is a stock. That distinction matters more when you start digging deeper into financial statements, brokerage reports, or Wall Street research.
What a Stock Actually Represents
A stock is a share of ownership in a specific company. If you buy shares of a company, you own a tiny slice of its business. If the business grows and profits rise, shareholders can make money as the value of their stake increases.
The two main varieties of stocks are common and preferred. The main difference is that common shares carrying voting rights, and preferred shares typically offer fixed dividends but no vote. Most individual investors buy common stock.
Stocks are issued through initial public offerings that allow them to be bought and sold on secondary markets, such as the New York Stock Exchange or the Nasdaq.
They're traded using ticker symbols, which is a shortening of a company's name to a few letters to make transactions more efficient. Ford Motor Company's ticker is F. Walmart’s is WMT. Microsoft's is MSFT.
What Falls Under the Equities Umbrella
In its broadest sense, "equity" refers to the real value of any asset you hold, after subtracting any debt. If you own a house with a mortgage, your equity is what the house is worth, minus what you still owe the bank.
Real estate ownership stakes, venture capital positions, and the shareholders' equity line on a company's balance sheet all use the same underlying idea: an ownership claim after debts are subtracted.
In terms of investing, "equities" can refer to a wide asset class where shareholders have some ownership in a company that entitles them to a piece of future profits and assets. They're different from bonds, which are financial instruments through which you loan money to a company or government.
Equities include stocks, as well mutual funds and ETFs that are made up of dozens or hundreds of stocks.
Private equities also fall under the umbrella. They represent ownership in a company that is not publicly traded. They're typically held by private equity firms whose general aim is to buy a company, manage it, and sell it or take it public, with the aim of turning a profit.
Why Wall Street Says Equities and Main Street Says Stocks
Institutional investors, analysts, and money managers often prefer to use "equities" because they're usually talking about a broad asset class, not shares of a particular company.
A fund manager building a diversified portfolio might say it's made up of 60% equities and 40% bonds, referring to the entire category rather than any single position.
Individual investors, on the other hand, usually buy specific companies. Saying "I just bought some Microsoft stock" sounds more natural than "I bought some Microsoft equities."
On financial news sites, including Benzinga, "stocks" and "equities" are often interchangeable. Whether one term or the other is used can depend on the context or who's being quoted.
