What is
What are equities?
The terms equity, shares and stocks are all used to describe a tiny part of a company.
The terms equity, shares and stocks are all used to describe a tiny part of a company.
The company will hopefully grow its profits and your share will enjoy a portion of the increase in the company’s profits and be paid a dividend.
However, a company’s profits will not only be affected by its own strategy, but also by world events and therefore growth cannot be guaranteed. Unlike fixed income where there is more predictability and therefore lower volatility.
The most popular way of investing in the shares of a company is via a specialist fund manager. The fund manager typically uses AI to reduce down the number of companies and then meets the company to decide if investing is a good idea. They monitor the investment for you and if the company does not deliver, the fund manager sells and buys another company.
The equity fund manager typically invests in 30–100 individual companies within a theme to diversify risk. Also, each company normally invests in different sectors and countries.
Equities are one half of the picture. The other is fixed income, where instead of owning a slice of a company you lend to it. Historically bonds have moved less sharply than shares, which is why a portfolio often holds both. What is a bond sets out the trade-off at each level of risk.
Information, not advice. This guide is general information to help you understand your options. It is not personal advice and not a recommendation to buy, sell or hold any investment. If you are unsure what is right for your circumstances, consider taking regulated financial advice. The value of investments and any income received from them can fall as well as rise, and investors may receive back less than they originally invested. Past performance is not a guide to future returns.