Equity vs. Security — What's the Difference?
By Urooj Arif & Maham Liaqat — Updated on April 15, 2024
Equity represents ownership shares in a company, reflecting an investor's stake, while security broadly includes any tradable financial assets such as stocks, bonds, or options.
Difference Between Equity and Security
Table of Contents
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Key Differences
Equity is a type of security that represents an ownership share in a corporation, providing voting rights and a residual claim on corporate earnings in the form of dividends. On the other hand, the term "security" is a broader classification that includes not only equity but also debt securities like bonds, derivatives, and other financial instruments that can be traded.
Investors purchase equity to gain a stake in a company, which potentially offers capital gains and dividends, tying their returns directly to the company's performance. Whereas, securities can range from low-risk government bonds offering fixed returns, to high-risk derivatives based on speculative outcomes.
The market for equities is often driven by corporate earnings, market sentiment, and economic factors that affect the specific company’s performance. Conversely, the security market at large is influenced by a broader range of factors including global economic conditions, interest rates, and geopolitical stability, depending on the type of security.
Regulatory frameworks govern equity trading to protect investors and ensure fair trading practices within the stock market. Security trading, encompassing a wider range of financial products, is subject to varied regulations depending on the type of security, which may involve different regulatory bodies and compliance standards.
Equity holders are considered partial owners of a company and have potential voting rights which can influence corporate governance. In contrast, holders of other types of securities, like bondholders, typically do not have voting rights but may have priority over equity holders in the event of a company's liquidation.
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Comparison Chart
Definition
Represents ownership in a company.
Tradable financial asset.
Types
Common stock, preferred stock.
Stocks, bonds, derivatives, etc.
Returns
Dividends, capital gains.
Interest, dividends, profits.
Risk
High, depends on company success.
Varies widely by type.
Regulatory Body
SEC (Securities and Exchange Commission) in the U.S.
Also SEC, but different regulations may apply depending on the type.
Compare with Definitions
Equity
Often offers voting rights in corporate decisions.
Equity holders voted on the proposed merger.
Security
Includes equity, debt, derivatives.
Options and futures are complex securities based on underlying assets.
Equity
Acquired through stock exchanges or private deals.
They purchased their equity directly from the owner.
Security
Subject to various levels of regulation.
High-yield bonds are securities with significant scrutiny.
Equity
Represents claim on assets and earnings.
His equity in the company allowed him voting rights.
Security
Any tradable financial asset.
Government bonds and corporate stocks are both types of securities.
Equity
Subject to market risks and rewards.
Market downturns can drastically affect the value of equity.
Security
Can be bought and sold on financial markets.
He trades securities on both the NYSE and NASDAQ.
Equity
Ownership in a firm via shares.
Buying equity in a startup can be risky but profitable.
Security
Provides income or speculative opportunities.
They invested in securities to diversify their income sources.
Equity
The state or quality of being just and fair.
Security
Security is freedom from, or resilience against, potential harm (or other unwanted coercive change) caused by others. Beneficiaries (technically referents) of security may be of persons and social groups, objects and institutions, ecosystems or any other entity or phenomenon vulnerable to unwanted change.
Equity
Something that is just and fair.
Security
Freedom from risk or danger; safety.
Equity
Justice achieved not simply according to the strict letter of the law but in accordance with principles of substantial justice and the unique facts of the case.
Security
Freedom from doubt, anxiety, or fear; confidence.
Equity
See court of equity.
Security
A group or department of private guards
Call building security if a visitor acts suspicious.
Equity
An equitable right or claim
An analysis of the equities and inequities brought about by the current trade bill.
Security
Measures adopted by a government to prevent espionage, sabotage, or attack.
Equity
Ownership interest in a corporation, property, or other holding, usually calculated as the value of the holding after subtracting any debt or liabilities.
Security
Measures adopted, as by a business or homeowner, to prevent a crime such as burglary or assault
Security was lax at the firm's smaller plant.
Equity
Equities Shares of common stock or preferred stock.
Security
Measures adopted to prevent escape
Security in the prison is very tight.
Equity
The value of a brand's reputation.
Security
Something deposited or given as assurance of the fulfillment of an obligation; collateral.
Equity
Representing an ownership interest
An equity stake.
Security
One who undertakes to fulfill the obligation of another; a surety.
Equity
Of or relating to stocks
An equity mutual fund.
Security
A financial instrument, such as a stock or bond, representing rights of ownership or creditorship and often traded in secondary markets.
Equity
Subordinated to all other claims on income, earnings, or assets
The equity tranche.
Security
(uncountable) The condition of not being threatened, especially physically, psychologically, emotionally, or financially.
Chad always carries a gun for his own security.
The pink blanket gives little Mary lots of security.
Equity
Fairness, impartiality, or justice as determined in light of "natural law" or "natural right".
Security
(countable) Something that secures.
Equity
(legal) Various related senses originating with the Court of Chancery in late Medieval England
Security
An organization or department responsible for providing security by enforcing laws, rules, and regulations as well as maintaining order.
Pamela works in security.
Equity
(legal) The power of a court of law having extra-statutory discretion, to decide legal matters and to provide legal relief apart from, though not in violation of, the prevailing legal code; in some cases, a court "sitting in equity" may provide relief to a complainant should the code be found either inapplicable or insufficient to do so.
Security
(legal) Something that secures the fulfillment of an obligation or law.
Equity
(legal) A right which accrues to a party in a transaction because of the nature of the transaction itself, and which is exercisable upon a change of circumstances or conditions; in other words, an equitable claim.
Security
(legal) Freedom from apprehension.
Equity
The body of law which was developed in the English Court of Chancery, which Court had extra-statutory discretion, and is now administered alongside the common law of Britain.
Security
A tradeable financial asset, such as a share of stock.W
Equity
(finance) Various senses related to net value
Security
(finance) Proof of ownership of stocks, bonds or other investment instruments.
Equity
Value of property minus liens or other encumbrances.
Home equity
I have a lot of equity in my house.
Security
(finance) Property etc. temporarily relinquished to guarantee repayment of a loan.
Equity
(business) Ownership, especially in terms of net monetary value of some business.
Security
A guarantee.
Equity
(accounting) Ownership interest in a company as determined by subtracting liabilities from assets.
Security
(obsolete) Carelessness; negligence.
Equity
(poker) A player's expected share of the pot.
Security
The condition or quality of being secure; secureness.
His trembling hand had lost the ease,Which marks security to please.
Equity
(nonstandard) Equality
Security
Hence, carelessness; negligence; heedlessness.
He means, my lord, that we are too remiss,Whilst Bolingbroke, through our security,Grows strong and great in substance and in power.
Equity
Equality of rights; natural justice or right; the giving, or desiring to give, to each man his due, according to reason, and the law of God to man; fairness in determination of conflicting claims; impartiality.
Christianity secures both the private interests of men and the public peace, enforcing all justice and equity.
Security
That which secures or makes safe; protection; guard; defense.
Those who lent him money lent it on no security but his bare word.
Equity
An equitable claim; an equity of redemption; as, an equity to a settlement, or wife's equity, etc.
I consider the wife's equity to be too well settled to be shaken.
Security
Freedom from risk; safety.
Give up yourself merely to chance and hazard,From firm security.
Some . . . alleged that we should have no security for our trade.
Equity
A system of jurisprudence, supplemental to law, properly so called, and complemental of it.
Equity had been gradually shaping itself into a refined science which no human faculties could master without long and intense application.
Security
One who becomes surety for another, or engages himself for the performance of another's obligation.
Equity
The difference between the market value of a property and the claims held against it
Security
An evidence of debt or of property, as a bond, a certificate of stock, etc.; as, government securities.
Equity
The ownership interest of shareholders in a corporation
Security
The state of being free from danger or injury;
We support the armed services in the name of national security
Equity
Conformity with rules or standards;
The judge recognized the fairness of my claim
Security
A formal declaration that documents a fact of relevance to finance and investment; the holder has a right to receive interest or dividends;
He held several valuable securities
Security
A department responsible for the security of the institution's property and workers;
The head of security was a former policeman
Security
Measures taken as a precaution against theft or espionage or sabotage etc.;
Military security has been stepped up since the recent uprising
Security
Defense against financial failure; financial independence;
His pension gave him security in his old age
Insurance provided protection against loss of wages due to illness
Security
Freedom from anxiety or fear;
The watch dog gave her a feeling of security
Security
An electrical device that sets off an alarm when someone tries to break in
Security
Property that your creditor can claim in case you default on your obligation;
Bankers are reluctant to lend without good security
Security
A guarantee that an obligation will be met
Common Curiosities
What is a security?
A security is a broad financial term that refers to any tradable financial instrument, including stocks, bonds, and derivatives.
Can equity be considered a security?
Yes, equity is a subset of securities, specifically representing ownership in a company.
What are the types of securities?
Securities include equities (stocks), debt securities (bonds), and derivatives (options, futures).
What is the significance of regulatory bodies for equity and securities?
Regulatory bodies ensure fair practices and protect investors from fraud across all types of securities, with specific rules varying by security type.
What is equity?
Equity is an ownership share in a company, typically represented by stock, that entitles shareholders to voting rights and a portion of the company’s profits through dividends.
Do all securities offer voting rights?
No, voting rights are typically exclusive to equity securities like common stock.
What role do equity holders play in a company?
Equity holders can influence company management and decisions through their voting rights in shareholder meetings.
Why might an investor prefer securities over other investment types?
Securities are preferred for their liquidity, diversity of options, and the varying levels of risk to suit different investor profiles.
How do equity and security differ in terms of risk?
Equity is generally considered higher risk compared to some securities like government bonds, as it is directly affected by company performance.
How does the risk of equity compare to bonds?
Equity involves higher risk due to its direct tie to company fortunes, while bonds are generally safer with fixed interest payments.
How do returns on equity compare to other securities?
Equity returns can be highly variable and potentially higher, as they are based on corporate profits and growth, whereas other securities like bonds provide fixed returns.
What is the primary market appeal of equity?
The main appeal of equity is the potential for significant capital gains and dividends if the company performs well.
What impacts the value of equity?
The value of equity is impacted by company performance, market conditions, and investor sentiment.
What governs the trading of securities?
The trading of securities is governed by regulatory laws and rules set by authorities like the SEC to promote transparency and fairness in the market.
Is investing in securities suitable for all investors?
Investing in securities requires careful consideration of risk tolerance and investment goals, as different securities offer varying levels of risk and return.
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Written by
Urooj ArifUrooj is a skilled content writer at Ask Difference, known for her exceptional ability to simplify complex topics into engaging and informative content. With a passion for research and a flair for clear, concise writing, she consistently delivers articles that resonate with our diverse audience.
Co-written by
Maham Liaqat
