An equity investment is money that is invested in a company by purchasing shares of that company in the stock market. These shares are typically traded on a stock exchange.
Why should I consider equities?
Equity investors purchase shares of a company with the expectation that they’ll rise in value in the form of capital gains, and/or generate capital dividends. If an equity investment rises in value, the investor would receive the monetary difference if they sold their shares, or if the company’s assets are liquidated and all its obligations are met. Equities can strengthen a portfolio’s asset allocation by adding diversification.
What are the potential benefits of equity investments?
- The main benefit from an equity investment is the possibility to increase the value of the principal amount invested. This comes in the form of capital gains and dividends.
- An equity fund offers investors a diversified investment option typically for a minimum initial investment amount.
- If an investor wanted to achieve the same level of diversification as an equity fund, it would require much more – and much more manual – capital investment.
- Investors may also be able to increase investment through rights shares, should a company wish to raise additional capital in equity markets.