DEFINITION:
Equities, or stocks, represent shares of ownership in a company. When you buy a stock, you own a piece of that company.
WHEN AND WHY IT’S USED:
Equities are used primarily when seeking capital growth. Investors typically include stocks in their portfolios to take advantage of a company’s potential to increase in value over time. Stocks can offer high returns compared to other asset classes, though they also come with higher volatility. This potential for significant gains makes equities a popular choice for long-term investors aiming to build wealth.
IMPORTANCE IN COMMUNICATION:
Communicating about equities with your financial advisor is important because it helps you understand the role that stocks play in your overall investment strategy. Discussing the selection, timing, and proportion of equities in your portfolio ensures that you are aware of both the potential rewards and the risks. This understanding can empower you to ask detailed questions about market trends and specific stock choices.
Clear dialogue about equities also builds a foundation of trust between you and your advisor. It allows you to discuss your risk tolerance openly and to adjust your exposure to stocks as your financial situation or market conditions change. Knowing why certain stocks are chosen or avoided can demystify the investment process and lead to better-informed decision-making.
EXAMPLES IN COMMUNICATION:
“What percentage of my portfolio should be in equities?”
“How are stocks performing in the current market climate?”