What Is Equity in Investing?

By Kristi Waterworth – Updated Dec 5, 2025 at 12:38 AM EST

Key Points

Investing begins with the initial cash used to buy assets, aiming to grow this through various means.
Equity represents ownership value after subtracting any debts, applicable to homes and investments.
Know the exact form of equity; practical differences exist between owning equities and other equities.

Buying an investment is a way to make your money grow. It all starts with the cold, hard cash you put down and increases through interest, inflation, the growth of a company, or a combination of the three.

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Interest Rate

An interest rate is the cost of borrowing money or the premium you get for lending money. Learn how interest rates affect the economy.

For example, you can borrow against the equity in your business to buy a new piece of equipment that might increase your ability to fill orders. If the rate of increase in business will more than outpace the interest rate you’re paying, it’s a good use of your equity. The same can be done with the equity in many types of securities using a margin loan, although the risk you face of not coming out ahead can be considerably higher.

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About the Author

Kristi Waterworth has been a contributing real estate and financial expert at The Motley Fool, covering real estate, investing, and personal finance topics, since 2020. Kristi has been interviewed by various TV media outlets and podcasts for her real estate investing expertise – from residential real estate to digital real estate and everything in between. Kristi’s journalist career spans over 25 years, and she has written about real estate investing, homeownership, and home construction specifically for the last decade. She was also previously a licensed Realtor and general building contractor before the Great Recession and housing market collapse. She holds a bachelor’s degree in American history from Columbia College in Missouri.

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