The market at a glance
Cash equities are the ownership layer of capitalism: roughly $100+ trillion of global market capitalisation spread across some 50,000 listed companies, traded on exchanges from New York (NYSE, Nasdaq — together about half of world market cap) to Tokyo, Shanghai, London and Frankfurt. "Cash" distinguishes buying the actual share — settled and owned — from derivatives that merely reference it.
The participants form a food chain: retail investors and their advisors at the base, index funds and ETFs (now ~half of US fund assets) as the passive middle, active managers, pension funds and sovereign wealth funds allocating at scale, and market makers and high-frequency traders supplying the liquidity everyone else consumes. Companies themselves are major buyers via buybacks — in many years the single largest source of net demand for US equities.
What actually drives share prices
- Earnings and expectations. In the long run, share prices follow earnings per share; over months, they follow revisions to expectations more than levels.
- Discount rates. Equities are long-duration assets: when bond yields rise, future profits are worth less today — the mechanical link between rates and stock valuations.
- The equity risk premium. Stocks have returned roughly 4–6% per year above government bonds over the last century — payment for enduring drawdowns that regularly exceed 30–50%.
- Flows and positioning. Index rebalances, buyback windows, options-hedging feedback and fund flows move prices with no news at all.
How the products fit together
Start with common stock — the atom. Preferred stock trades equity upside for bond-like income and priority. ETFs and mutual funds wrap diversified baskets into single tickets — the difference is intraday tradability and the creation/redemption machinery. ADRs/GDRs import foreign shares to your home exchange, and REITs push property cash flows through the equity wrapper.
Key concepts to master
Valuation always reduces to discounting. Whether dressed as P/E multiples, DCF models, or dividend yields, every valuation asks: what are future cash flows worth today? The dividend discount model is the cleanest teaching version — try it below and watch how brutally sensitive fair value is to small changes in the growth/discount gap. That sensitivity is equity volatility, explained in one formula.
$$ P_0 = \frac{D_1}{r - g} \qquad \text{— the Gordon growth model} $$
Risks the brochure understates
Single stocks can and do go to zero — diversification is the only free lunch here. Drawdowns arrive clustered, not smoothly. And valuation discipline matters most exactly when it feels most irrelevant: buying "great companies at any price" has repeatedly cost investors a decade of returns. The product pages below give each instrument's specific risk profile.