EQUITY INVESTMENT

What Does Equity Investment Mean?

The most basic equity investment operation is the purchase of a common share. Common shares are pieces of a given business, also known as stocks. These stocks entitle the owner to a certain portion of the profits and assets and they can be bought either privately or publicly, depending on how the company is currently structured.

On the other hand, there are other types of equity investments like preferred shares, stock options and convertible bonds, which are different than common shares since they limit the way the owner participates in the company’s profits or they require certain event to take place before they can be converted into an equity instrument. Also, there are financial companies that offer equity investment securities that serve as a pool of many equity investments.

This is the case of equity mutual funds and ETFs, normally managed by professionals. For investors to engage in this kind of investments they must purchase the mutual fund or ETF shares and that entitles them to certain portion of the overall pool of equity investments.