Own a slice, share the results

Watch three years of the business.

A company is split into **100 shares**. You buy **1**. That makes you an owner of **1%** of the business.

As an owner, your results follow the **business**. A good year is good for you. A bad year is bad for you. Nobody promises you a fixed amount. This is **equity**: owning shares of a company.

Lender or owner?

Switch between a good year and a bad year.

Last lesson you **lent** money and were paid fixed interest. Owning a share is a different deal.

**Remember:** a lender is promised a fixed return. An owner is promised nothing, but shares in whatever the business earns.

A smooth path and a bumpy one

Drag through the ten years.

The deposit grows the same amount every year. A share's price **moves every day**, with the business and with news about it.

Made-up example path, to show how share prices move.

Why the price keeps moving

Tap each piece of news.

Shares are bought and sold on a stock exchange all day. When news changes what people think the business is worth, the price moves.

**Remember:** the price can change from minute to minute. The business underneath changes much more slowly.

Higher returns, no guarantee

Switch between the two stretches of history.

Over long periods shares have often earned more than deposits. That extra return is the reward for taking on the bumps and the lack of a promise.

Past returns don't promise future ones.

Check — Question 3 of 4

Put each one where it belongs.

What you now know

• Equity means owning shares of a company. Your stake is your shares out of all its shares.
• An owner's results follow the business, in good years and bad.
• A lender is promised fixed interest and money back; an owner is promised nothing.
• Share prices move all the time, with the business and with news.
• Over long periods shares have often earned more than deposits, with no guarantee.
• Bad stretches can last years, so money needed soon is risky in shares.