What Are Equity Securities?

Equity securities are financial assets that represent shares of a corporation. The

most prevalent type of equity security is the common stock. And the characteristic that
most defines an equity security—differentiating it from most other types of securities—is
ownership.

If you own an equity security, your shares represent part ownership of the issuing
company. In other words, you have a claim on a percentage of the issuing company’s
earnings and assets. If you own 1% of the total shares, or security stocks, issued by a
company, your part ownership of the controlling company is equivalent to 1%.

Other assets, such as mutual funds or exchange-traded funds, may be considered

equity securities as long as their holdings are composed of pooled equity securities.