Equity represents ownership in a company and signifies a shareholderís claim on the firmís assets and earnings. When an investor buys shares of a company, they become a part-owner or shareholder, entitled to a portion of the companyís profits in the form of dividends and potential capital appreciation as the stock price rises.

The equity market, also known as the stock market, is where investors buy and sell shares of publicly listed companies. Equity investments are considered an important avenue for wealth creation over the long term, as they offer higher returns compared to traditional fixed-income instruments, though they also come with higher risk.

Types of Equity:

• Common Equity: Represents regular shares that provide voting rights and dividends, though payouts are not guaranteed.
• Preferred Equity: Offers fixed dividends and priority over common shareholders during liquidation but usually does not provide voting rights.

Importance of Equity:

• Ownership and Control: Equity shareholders have voting rights in major company decisions and elections of the board of directors.
• Capital Appreciation: Investors benefit when the company performs well, increasing the stockís market value.
• Liquidity: Listed equities can be easily bought or sold on stock exchanges like the NSE or BSE.

Example: If an investor buys 1,000 shares of a company at ?100 each, their total equity investment is ?1,00,000. If the share price increases to ?150, the investorís holdings are worth ?1,50,000, generating a profit of ?50,000, excluding dividends.

In summary, equity is a key instrument for long-term wealth creation and ownership in a company. However, investors should assess their risk tolerance, diversify their portfolio, and stay informed about market trends before investing in equities.