Equities, stocks & shares! What is the difference?

Equity, stocks and shares all mean the slice of a company, but are used by different types of people. Industry professionals usually say equities, Engish use shares and Americans say stock.

I know it all sounds confusing and finance is not deliberately designed to complicate and confuse people, it’s just that all industries have their own language, investing is no different. Just like in sailing they say port and starboard, instead of left and right.

Equities, just refer to either stocks or shares. When you buy a share of stock, you are purchasing a slice of that business. This gives you a claim on its profits and potentially a right to vote on company matters. The value of your equity in a company fluctuates with the market and is influenced by factors such as company performance, broader economic conditions, and investor sentiment.

Despite being a core financial term, equity consistently ranks as one of the most confusing pieces of jargon for the general public. Recent research from forex broker comparison site BrokerChooser found that “equity” is the most searched-for financial definition in the world, generating a staggering 247,100 global searches per month. In the UK alone, it attracts nearly 18,000 monthly searches. The report found that equity accounts for almost 12 percent of all searches for financial definitions, highlighting how widespread the confusion really is.

Adam Nasli, Head Analyst at BrokerChooser, explained that the confusion largely stems from the word’s multiple uses. “While it’s a fundamental financial concept, equity is often misunderstood due to its broad usage across different contexts,” he said. “In the stock market, equity usually refers to shares in a company, giving investors partial ownership, potential voting rights, and a share in the profits.”

Separate survey data from Hargreaves Lansdown paints a similar picture. In research conducted by Opinium on behalf of HL, only 13 percent of respondents correctly identified that “equity” and “share” are interchangeable terms in the context of stock market investing. Nearly half of those surveyed said they didn’t know the difference at all. Sarah Coles, Head of Personal Finance at Hargreaves Lansdown, commented: “This demonstrates that some people simply don’t know what a share is, something they need to get to grips with at the start of their investment journey.”

The implications of this confusion are significant. Without a basic understanding of what equity is, many people are either making poor financial decisions or avoiding investing altogether. BrokerChooser estimates that financial illiteracy, including misunderstanding of terms like equity, has cost UK adults a combined £26 billion in missed opportunities and bad decisions.

Thankfully, though, I think the world is becoming both more educated through bite-sized social media education, but overall dumbed down by the rise of AI and reduced need to figure things out.