Equity securities investors have an ownership interest in a publicly-traded company. In comparison, investors in bonds issued by the same company receive a claim to a promised stream of cash payments (coupon or interest rate) for a fixed period of time or maturity date. Equity securities participate in some portion, depending on classification, in a claim to receive an infinite stream of payments (in the form of dividends and capital gains) based on the economic fortunes of the company. Investments in shares of publicly-traded companies can be made across all industries in the United States and abroad. Companies that compete with each other to provide similar goods and services comprise an industries or sector of the equity securities markets.
Equity securities which you will consider for your investment portfolio can generally be considered in one of the following categories:
While equity securities possess the greatest potential for economic gain, investors should be reminded of the lessons learned from investments made in “buggy whip” companies that went out of business after Henry Ford began the mass production of automobiles. Diversification will remove a single company’s business-specific risk. Diversified portfolios are still subject to the risks of the overall market and economy. Investments in equity securities can be made directly in shares of publicly-traded companies or through investments in diversified portfolios, such as:
- exchange traded funds;
- mutual funds;
- variable annuities;
- qualified retirement plans; or
- registered investment advisor custodial accounts.
Some portion of the portfolio holdings should be invested in equity securities depending on the investment time horizon and whether there are sufficient investments in fixed income securities. The allocation of invested funds between equity and fixed income securities is the single most important investment decision in reaching a suitable investment portfolio based on your investment objectives and risk tolerances.
Investors are advised to seek competent financial, tax and legal advice concerning the decisions they make with their investments. Klayman & Toskes, P.A. can provide you with a free consultation concerning securities industry violations related to the handling of your investments accounts by a full-service brokerage firm or registered investment advisor.
Information contained on this webpage is for educational purposes only
and should not be considered legal advice.
No Information contained on this website creates an attorney-client relationship.