What Are Equities?

When you invest in a stock, you become one of the owners of a corporation. Stocks represent ownership shares, also known as equity shares. For companies, issuing stock is a way to raise money to grow and invest in their business.  Whether you make or lose money on a stock depends on the success or failure of the company, which type of stock you own, what’s going on in the stock market overall, and other factors. Stocks and stock mutual funds often can be an important component of a diversified investment portfolio.

Why Should You Invest in Equities?

Capital Growth

In the event that a company’s share price goes up and you, in turn, decide to sell those shares, you make money. In this case, those equities are worth more than what you bought them for.  However, share prices can also decrease, which means you may end up getting less for those equities than you paid for them.

Income

Many people choose to invest in equities as a source of income.  Many companies pay out part of their profits as dividends to their shareholders.

Equities Often Have Higher Yields

Historically, equities perform better than cash investments or bonds over time.  This can be especially true for investors who choose to re-invest their dividends.  Investment in equities is more likely to protect the value of money through fluctuations like inflation.  That being said, the risk of investment is higher on equities, especially if your investment is only in a few companies.  The best way to mitigate this risk is to spread your investments out over several equities through an equity fund.  This process is called diversification.

More Resources

For more information on equities/stocks visit the resources listed below:

http://www.finra.org/investors/stocks

http://finra-markets.morningstar.com/MarketData/EquityOptions/default.jsp

Carty & Co. Can Help You Invest

Our expert financial professionals are ready to help you take the next step toward financial success.  Plan for retirement, learn about market trends, and discover what it takes to live the life you’ve always dreamed of.

Learn more about different types of stocks and how to assess whether a given stock is right for you by reaching out today.

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