In financial jargon, ‘equity’ refers to ownership in any asset after all debts associated with that asset are paid off. For companies, equity represents the net assets belonging to the owners. ‘Shares,’ on the other hand, are units of ownership in a company, each representing a slice of its total equity. So, if a company’s equity is the entire pizza, each share is a single slice.
Shares are tradable units, bought and sold on the stock exchange. Equity, however, is a broader term, often used when talking about investment returns, capital raising, and balance sheets. As a SEBI Registered Investment Advisor, I can tell you that understanding this difference is crucial when you’re dabbling in wealth management or portfolio management services. After all, Warren Buffet said, “Risk comes from not knowing what you are doing.”
So, when investing in a company, having shares means you own a piece of it, and with that comes voting rights and dividends. Having equity means you have an interest in the net assets and future profitability of that enterprise.
To sum up, if you’re contemplating whether to invest in shares or gain equity through some other means, consult with a SEBI Registered Investment Advisor to match your investment strategy with your financial goals.
