Equities
Equity shares (ordinary shares and common stock) represent ownership in a company, giving investors rights to vote and receive dividends. Some companies issue different classes of shares (e.g. A and B shares) with varied rights.
Preference shares (preferred stock) are a form of equity with debt-like features (see Bonds). Dividends are paid out to preference shareholders before ordinary holders. In bankruptcy, preferred stockholders are paid from any remaining company assets in priority before the ordinary stockholders. Preference shares often lack voting rights associated with common shares.
The value of your investments and the income from them may go down as well as up, and you could get back less than you invested. Past performance is not a reliable guide to future returns.
Key Features of Equities
Ownership
Equities signify partial ownership in a company, giving shareholders a claim on the company’s assets and earnings
Voting Rights
Shareholders typically have voting rights, allowing them to participate in important company decisions, such as electing the board of directors
Dividends
Equities may pay dividends, which are a portion of the company’s profits distributed to shareholders. However, dividend payments are not guaranteed and depend on the company’s profitability.
Capital Appreciation
The value of equities can increase over time, providing potential for capital gains when sold at a higher price than purchased
Liquidity
Equities are generally liquid assets, meaning they can be bought and sold relatively easily on stock exchanges
Risk
Investing in equities carries risk, including market risk, economic risk, and company-specific risk
The value of equities can fluctuate significantly based on various factors. Equities can be a valuable part of an investment portfolio, offering the potential for growth and income. However, it’s important to understand the risks involved and to diversify investments to mitigate those risks.
