Understanding Equity Markets

Abstract

If you want to achieve superior investment returns, you will need to have equity exposure in your investment portfolio. Plainly said, holding ownership in shares or equities in a company is tantamount to having fractional ownership in the company in proportion to the total number of shares outstanding. The shareholder is “last man standing” after all claims such as debt (bondholders) are discharged when a company fails or "files for Chapter 11." Thus, shareholders have the most to lose in event of a company default. However, compared to bondholders who only receive a fixed interest from debt holdings in a company, shareholders in a company potentially have the most to gain if a company prospers.