When you buy a share of a company, you become a part-owner of that business. This is what the word equity means in finance — a claim on the residual value of an enterprise after all its debts are paid.
That claim comes with two potential sources of return. The first is price appreciation: if the company grows in value, your share of it grows with it. The second is dividends: some companies distribute a portion of their profits directly to shareholders on a regular basis.
Equity markets — stock exchanges — exist to make these ownership stakes tradeable. Instead of holding a private stake in a company indefinitely, investors can buy and sell shares continuously, which allows capital to flow toward businesses where it is most productive.
The price of a share at any given moment reflects the collective judgement of all market participants about the future earnings of that business, discounted back to today. When expectations change, prices move.
Understanding equities means understanding that a share is not a lottery ticket — it is a fractional ownership stake in an operating enterprise.