Equity
Another word for shares: part-ownership of a company. Shareholders benefit if the company grows but can lose money if it struggles.
In plain English
When you buy a share (also called a stock or equity), you own a small slice of a company. You can benefit if its value rises and, if the company pays one, you may receive a dividend from its profits.
Shares are traded on stock exchanges such as the London Stock Exchange. Their prices change constantly depending on what buyers and sellers think the company is worth.
An everyday example
If a company is split into 1,000,000 shares and you own 100, you own 0.01% of it. If the company’s value doubles over time, your shares would roughly double too; if it fails, they could become worthless.
Why it matters for investors
Over long periods, shares have historically grown faster than cash or bonds, but with bigger ups and downs along the way. That trade-off between growth and risk is at the heart of investing.
In the Knightsman Letters
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Related terms
Education only, not financial advice. Examples are simplified and use illustrative numbers.