Which type of security represents ownership in a company?

Equities represent ownership in a company, making them a key form of investment for those seeking to participate in a company’s growth and profits. When an individual purchases equity securities, commonly known as stocks, they acquire a share of ownership in the business. This ownership comes with certain rights, such as voting rights at shareholder meetings and the potential to receive dividends based on the company's profits.

Equities are fundamentally different from other types of securities. For instance, bonds and debentures are forms of debt. When an investor buys these securities, they are essentially lending money to the issuer (which could be a corporation or government) and are entitled to receive interest payments rather than owning a piece of the issuing entity. Derivatives, on the other hand, derive their value from an underlying asset but do not confer any ownership stake in that asset. Understanding the ownership aspect of equities is critical for investors who want to engage in the stock market and benefit from the performance of a company.