Water lily painting: Licio Passon www.liciopasson.it
When buying equities, an investor is buying a stake in a company. The price of an equity, or share price, is driven by supply and demand on the stock exchange. Many companies pay dividends to their shareholders once or twice a year. The return investors can earn on equities consists of share price gains and dividends.
As the financial results of the companies in which you invest can vary greatly, the performance of the equities in your portfolio may also fluctuate strongly. Equities are a high-risk investment.
If stock market prices fall, the value of your investments will drop, and vice versa. This risk is mainly influenced by the global economy, such as economic growth or decline.
The risk that you are unable to easily sell certain investments because there are few buyers. This risk is limited if you invest in listed equities or highly liquid government bonds.