Equity markets can be very useful under stable economic condition and they can be effectively used as a source of finance. Equity securities actually represent the ownership in the related business and it is open-ended i.e. the ownership is not related to a specific time period and carries on until the shareholder withdraws from it or the business dissolves. However, the risk involved in equity securities is that their value might decrease over time.
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These securities do not relate to the ownership in the company but merely the loan acquired. Debt securities have a maturing date after which the agreed settlement is made and securities are freed. The greatest risk involved in debt securities is that the company might go bankrupt and become unable to fulfill its liabilities. The value of these securities is dependent on the interest rate prevailing in the open market and any fluctuation might devalue them. Most investors opt for debt securities for income and stability of their principal.
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