Equity in the stock market represents ownership in a company, typically in the form of shares or stocks. When investors buy equity, they acquire a stake in the company, entitling them to a portion of its profits (through dividends) and potential capital appreciation if the stock price rises. Unlike debt instruments like bonds, equity does not guarantee fixed returns but offers higher growth potential. Common types of equity include common stocks (providing voting rights) and preferred stocks (offering priority in dividends but usually no voting rights). The value of equity fluctuates based on market demand, company performance, and economic conditions. Investors trade equities on stock exchanges like the NYSE or Nasdaq, where prices are determined by supply and demand. Equity investments are crucial for wealth creation, though they carry risks such as market volatility and company-specific downturns. Long-term investors often build diversified equity portfolios to mitigate risks while benefiting from compounding growth. Overall, equity serves as a key instrument in the stock market, enabling companies to raise capital and investors to participate in business growth while sharing in its successes and risks.