Equities are the same as stocks, which are shares in a company. That means if you buy stocks, you’re buying equities. You may also get “equity” when you join a new company as an employee. That means you’re a partial owner of shares in your company. Because equities don’t pay a fixed interest rate, they don’t offer guaranteed income. In other words, equities inherently come with risk.
People invest in equities because of their potential for high returns. In your investment portfolio, your “equity exposure” is another way of describing your exposure to the risk that you will lose money if the value of the stocks you own declines.
Conventional wisdom states that young people can afford more equity exposure, and therefore will likely want more stocks because of their potential for sizable returns over time. As you near retirement, though, equity exposure becomes more of a risk. That’s why many people transition at least part of their investments from stocks to bonds as they get older.
The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.
Tax treatment varies according to individual circumstances and is subject to change.
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