The current economic outlook in the UK means interest rates for savers are likely to remain low into 2024. This can be frustrating for those who are savvy with their personal finances, as it means money can languish in current and savings accounts being eaten away by inflation. An alternative that can make your money grow is equity investing; however, this comes with risks.
Equity investing means buying shares in a private or publicly listed company on the stock market. As a business’s value increases or decreases, so does the value of the shares.
There are different types of investment in equity, which are normally through funds. They can be highly varied, including funds for specific industries, countries, index funds and income funds. Here is a handy explanation of how the stock market works from Forbes.
What are the pros of investing in equity funds?
– It may provide better returns than savings accounts.
– You can receive dividends.
– If it is a public company, you can transfer ownership easily. This is different to transferring equity in your home, when you are advised to use a transfer of equity solicitor. Using a transfer of equity solicitor will be money well spent.
– You may be entitled to a shareholder vote.
What are the cons of investing in equity funds?
– You could lose money if the value of the company decreases.
– If the company you have invested in becomes insolvent, you could also lose money.
– The value of your shares may be affected by events outside the firm’s control, such as politics, geopolitics, and foreign currency fluctuations. You can lower the chance of mishaps by investing in funds with a lower level of risk.