Equities. They sound technical, but if you’ve ever bought a share, you’re already in the game.

For long-term investors, equities are often at the heart of the portfolio – whether you’re investing through superannuation , exchange-traded funds (ETFs) , or directly on the Australian Securities Exchange (ASX) .

But even experienced investors sometimes gloss over what equities actually are. And that’s fair. The word gets thrown around a lot, often without much context. So, let’s change that.

This article won’t drag you through accounting equations or corporate balance sheets (though we’ll briefly touch on things like shareholder equity ). We’re here to help you make sense of equities in the investing world – what they are, how they work, and how they differ from other investments.

Because once you understand equities, the rest of investing can start to feel a lot clearer.

What are equities?

Equities are just another word for ownership in a company. When you own equity, you own a piece of that business. That could be a small slice of a big company listed on the ASX or a larger share in a smaller, privately held firm.

If you’ve bought shares, you already hold equity. Simple as that.

More formally, equities represent shareholder equity – what’s left over after a company subtracts its liabilities (what they owe) from its assets (what they own).

In other words, it’s the company’s net assets, and you as a shareholder own a portion of that. It can include retained earnings (profits the company has kept rather than paid out) and any capital the company has raised from shareholders.

But this isn’t just a textbook concept. It’s a real stake in a real business. And with that stake comes both risk and reward.

As a shareholder, you may receive dividend payments if the company decides to share profits. You might also benefit from capital gains if the value of your shares goes up and you decide to sell. But that value isn’t guaranteed. Share prices rise and fall based on market movements, company performance, investor sentiment and broader economic conditions.

So yes, equities come with potential. But they also come with volatility. And understanding that trade-off is a big part of becoming a confident investor.

Are equities and shares the same thing?

Pretty much – al though the terms get used differently depending on where you are and who you’re talking to.

In Australia, we mostly say "shares". On the ASX, when you buy into a company, you’re buying shares . Over in the US, they’re more likely to say you’re buying stocks or equities. But at their core, they all refer to the same thing: ownership in a company.

So yes, equities and shares are the same thing – b ut context matters.

You might also come across terms like common shares, preferred shares, and treasury shares. These describe different types of equity:

• Common shares are what most investors hold. They typically come with voting rights and the potential to receive dividends .
• Preferred shares usually don’t offer voting rights but may come with fixed dividend payments.
• Treasury shares are shares the company has bought back and holds itself; they’re not available to the public.

In practice, you’ll deal with these terms in a few ways. If you're buying individual companies on the ASX, you’re picking up shares directly. If you invest via ETFs or through your super fund , you’re likely gaining exposure to a basket of shares – spreading your investment across dozens or even hundreds of companies.

So, while the terminology can vary, the idea stays the same: you’re becoming a part-owner in a business. And that’s the core of investing in equities.

How do equities differ from other investments?

Equities are just one way to invest, and they sit on the “growth” end of the risk-reward spectrum. That means that compared to other asset types, they offer the potential for capital gains, dividends, and long-term wealth building. But that comes with a fair bit of uncertainty.

Here’s how equities stack up against some of the main alternatives:

• Bonds : Bonds are often considered lower risk. You’re lending money to a government or company, and in return, you get regular interest payments. Unlike equities, you don’t own part of the business – you’re just a creditor. Returns are typically more stable but also more limited.
• Cash : Think high-interest savings accounts or term deposits. These offer security and accessibility but little growth. But inflation can eat into your returns, especially over the long term.
• Property : Residential or commercial real estate can deliver rental income and capital growth. But it usually requires more upfront capital, comes with ongoing costs, and isn’t as easy to buy or sell as equities.
• Alternative investments : This bucket includes things like crypto , collectibles, or assets traded on alternative investment markets. These can be high risk, highly speculative, and harder to value – but for some, they offer diversification or upside beyond traditional markets.

What makes equities unique is their dual potential:

• You might earn dividends as companies distribute profits.
• You can benefit from capital gains if the share price increases over time.

But it’s not all upside. Share prices can be hit by market volatility, company missteps, or broader economic events. Even the sector or region you’re investing in matters – some industries or countries can outperform, while others lag. Equities can vary depending on the strategy or fund you’re using.

Compared to “defensive” asset classes like fixed income or balanced retirement accounts, equities carry more short-term risk. They also offer more long-term growth potential. That’s why many long-term investors include equities in their mix. It’s about finding the right blend that suits your goals and risk profile.

Everyone’s situation is different, though. If you’re not sure where equities fit in your broader strategy, it’s worth considering professional guidance. This article is general in nature – it doesn’t consider your personal goals, financial circumstances or needs.

How can I invest in equities?

There are plenty of ways to invest in equities. Here are the main options most Australian investors use:

Buying individual shares on the ASX

This is the most hands-on approach. You choose specific companies listed on the ASX and buy shares directly. You’re in control. But it takes time, research, and a fair bit of confidence to build and manage a well-diversified portfolio this way.

Equity ETFs

These are funds that trade on the stock exchange, just like shares. However, instead of owning one company, you’re buying into a bundle of them. Some ETFs invest in broad indexes (like the ASX 200 ), while others focus on sectors (like tech or healthcare) or specific regions.

• Passive ETFs aim to track a market index, keeping costs low.
• Active ETFs are managed by professionals who try to outperform the market, but they often charge higher fees.

Managed funds

Like ETFs, managed funds pool investor money and invest in a basket of equities. They’re usually unlisted (not traded on an exchange), and you invest through the fund provider. These may work for investors who prefer a hands-off, longer-term approach.

Superannuation

Whether it’s your default fund or your chosen super fund , your retirement savings are likely already invested in equities. Most balanced and growth options include a decent allocation to Australian and global stocks, often through a mix of equity ETFs, managed funds, and direct holdings.

Other factors to consider

No matter how you choose to invest, there are a few things worth checking:

• Fees – lower fees can make a big difference over time.
• Market capitalisation – are you investing in large, mid, or small-cap companies?
• Underlying holdings – what companies or sectors are included?

Some funds are broad and diversified. Others are niche and highly concentrated. Either way, knowing what you own, and why, can help you stay the course through market ups and downs.

Keep it simple, stay consistent

Understanding equities is a big step in becoming a confident long-term investor – but it doesn’t need to be complicated. At its core, equity simply means ownership. And whether you’re investing through super, ETFs, or individual shares, ownership comes with both risks and potential rewards.

So if you're thinking about investing in equities, start with what suits you . Consider your goals, your time horizon, and how much risk you're comfortable with.

Happy investing!