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Equity Related Securities (ERS)

Equity Related Securities

What are Equity related securities?

Equity related securities (ERS) refer to those securities, which offers ownership in line with that of equity of various organizations. It actually denotes a debt instrument which is related to the equity market. So, in layman language, it is a hybrid instrument. Or, we may say that it looks like a debt instrument but behaves like an equity one.

Good Investment option for those with Medium Risk appetite

Equity related securities are a good option for people with medium risk appetite and wants to have a bit of both worlds. But it must be noted that though one is assured of the benefits of both the worlds, the risk associated with both, though reduced a bit, is not eliminated.

They were introduced in 1990 and were mostly offered in the form of mutual funds, Certificate of Deposits, annuities, etc.  They generally come with a restriction on the maximum one can earn from that instrument. While in some, the amount is capped, in others there is a percentage cap.

How are they different from Convertible Bonds?

  • The return from ERS is limited
  • ERS does not provide any capital protection
  • Though there is a cap, the returns linked with ERS are generally higher than the underlying stock.
  • ERS are more liquid
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Sreya Ray is working as a Manager at State Bank of India. She is a voracious reader and a passionate writer. Her life is complete with her daughter and the support of her husband and the inspiration of her parents. Sreya loves multi-tasking and is a dreamer. If she don't create anything on a day,She feels that she had wasted my day.


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