Let’s talk equities
An equity is a part ownership/shares of a company. So if you buy a share of Bank X, you own a tiny bit of that company. Millions of shares in each company can be issued and they need to be held long term to realise gains.
Risk – buying individual shares is risky. Unless you know the company’s financial standing extremely well, the best way for investors to access equities is via funds.
Funds are usually the first step into #investing in the #stockmarket market. Funds are where many investors pool their money together and that money is invested in a selection of shares or bonds. Depending on the theme of the fund, a #fundmanager selects various shares (let’s use an example of European shares/equities) which she believes will add value or growth. For example she (the manager of the portfolio) might buy some shares in an Irish bank, a U.K. supermarket and a Danish toy company amongst others, because having done lots of research, she believes these shares are undervalued and will grow. For her expertise you pay a management fee from the amount you invest.
Each fund will have a theme. It could be based on geography (our European equity example)or on an industry (a fund that just invests in banks or green energy) or on size (a fund which just invests in small companies or large companies). The fund could also invest in bonds or real estate and we will discuss that in another post.
A fund is diversified ie it holds many different equities in different companies and so this spreads out your risk. Tomorrow we discuss index funds.
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