Money that is invested in a firm by its owner(s) or holder(s) of common stock (ordinary shares) but which is not returned in the normal course of the business, is termed an Equity Investment. Investors only recover their investment when they sell their shareholdings to other investors, or when the assets of the firm are liquidated and proceeds are distributed among them after satisfying the firm’s obligations. Investors thus become shareholders in the companies.
Equity investments generally are made either by buying stock direct through a stockbroker, online or via collective funds (Unit Trusts, Mutual Funds etc).
There are advantages and disadvantages to buying direct and through collective funds.
To buy direct equities (shares in a company) is a cheaper way of investing, but you generally should either know what you are doing by your own research or employ advisers to reduce your risk. Shares can be very volatile.
To buy equities through a collective fund requires a payment to the Fund Manager. However the expertise of the top managers is often well worth the charges made.
The equity fund industry became a recognised industry with the passing of the Investment Company Act of 1940 (the ’40 Act) and has since grown into a Trillion Dollar industry.
As with shares however, it is always better to seek advice on which funds to invest in. Industry estimates indicate that only the top 20% of fund managers beat the markets consistently.
Holborn Assets advisers have access to the research required to identify the top fund managers and work with clients to reduce investment risk. Contact a qualified Holborn Assets adviser today for more information.