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Finance Dictionary and Glossary of Investment Terms
Any security that represents an ownership stake rather than an IOU. Equity securities include common and preferred stock. Bonds are not equity securities; they are simply loans to the company. Bondholders can expect repayment of principal from the business, while stockholders hope for dividends and price appreciation. In the event the business goes bad, the bondholders have a claim on the company''s assets that supersedes the claims of equity holders.