A Primer on Equities and Bonds

Equity is nothing but your ownership in an asset. Debt, on the other hand, doesn’t give you ownership but allows you to claim your money back with interest after a specific period of time. Bonds are the most commonly used debt instruments in the markets.

Consider a situation where you want to buy a Netflix subscription for INR800. Since, you didn’t have sufficient money – you are 11 for christ’s sake – you borrowed the sum from your mother and told her that you’d return the same in a month’s time with an additional cookie for her faith in you. This agreement/ bond that you signed with your mom is the debt you owe with cookie being the interest.

However, you also wish to share the subscription with 3 other friends of yours. In this case each of them pays INR200 and now own 25% shares of the subscription. This 25% is your and their equity.

Stock classifications aren’t always that simple, but we would keep more on stocks for Stocks 102 and 103.