Which of the following is a characteristic of equity securities?

Equity securities represent ownership stakes in a corporation, which is a fundamental characteristic of this type of investment. When an investor purchases equity securities, such as common or preferred stocks, they become partial owners of the company. This ownership grants them certain rights, including the ability to vote on corporate matters, participate in decision-making processes, and share in the profits of the company through dividends and capital appreciation.

Unlike fixed income securities, equity does not provide guaranteed or fixed returns, as values can fluctuate based on market conditions and company performance. Also, equity securities do not guarantee dividends; companies may choose to reinvest profits instead of distributing them to shareholders. Lastly, while equity markets can experience periods of significant volatility, they are not immune to such fluctuations. Therefore, the defining trait of equity securities is their nature as a reflection of ownership in a corporation.