What are equities?
Equities are shares of ownership in a company. When you buy equities, you are effectively becoming a part owner of that business. The fortunes of that company will be reflected in its share price.
When the company does well, the price of its shares tends to go up. When it does poorly, that price may fall. Identifying a good company at the best time to invest is one of the essential skills of a good equity fund manager.
Investors can receive a return from investing in equities in two ways:
- Through growth of capital (where the share price reaches a higher price than was paid at the time of purchase)
- Through receiving dividends from the company - a payment to its shareholders
Dividends are paid out to a company’s shareholders at set times of the year. They generally represent a share in the profits of the company and will vary depending on the company’s business strategy and how well it is doing.
The board that runs the company will decide how much profit to pay out as a dividend to its shareholders and how much profit to reinvest into the company to drive future growth.
If held directly, any dividends will be paid to you as the shareholder, but if you’ve invested in equities via an investment fund, the dividends are paid to the fund. The managers of the fund may decide to pay an annual distribution to investors.
The value of investments will fluctuate, which will cause fund prices to fall as well as rise and you may not get back the original amount you invested. Please note an investment in equities carries a higher risk than cash on deposit. An equity investment will fluctuate in value.
M&G equity funds