Equities are suitable as part of a diversified portfolio, in which the investment is distributed over a number of assets, minimising the investment's risk. Investing in equities requires you to keep track of the companies that have issued the equities, as well as of the general market conditions.
Equities are shares of ownership in a limited liability company. They are owned by shareholders who have certain rights that come with the shares. A company can issue equities (shares) to raise capital from new shareholders who will invest in the company and get to exercise certain rights in return. To put it simply, when you buy shares in a company, you become one of its shareholders.
Shareholders’ rights include the right to receive dividends and the right to participate and vote in general meetings. In addition, shareholders have the right to make proposals concerning matters on the agenda of the general meeting. The number of votes a shareholder is entitled to may vary depending on the type of share they hold if so provided by the Articles of Association.
As a shareholder of a listed company, you have rights. Visit regularly the company website for information. Nordea publishes General Meeting information in Netbank based on your holdings. Log in to netbank, choose savings and on the right corporate events. General Meeting events, registering, attending and voting varies from country to country. There may be additional costs related to a corporate actions event.
If you invest in shares, the first thing you'll have to do is choose which company’s shares you want to buy.
As a shareholder, you can also affect the business by taking part in the company’s Annual General Meetings. When picking the shares in which to invest, you should carefully consider your investment options.
Examples of potential investment criteria include strong dividend payment history, good plans and growth potential, strong management, the impact of megatrends on the business, and the company’s key figures. But there are also many other factors that may come into play when picking which shares to buy.
It’s often good for an investor to take an interest in the company and the market they want to invest in.
You can invest in equities
In addition, you can invest in equities by subscribing for shares in share issues or share sales where the present owners of the company sell part of their holdings to new investors.
The shares are in the form of book-entries and you will need a book-entry account for them. The book-entry account will be opened in the bank. After your trades have been completed you will receive a calculation to help you to settle capital gains or losses in taxation.
In order to be able to trade, you will need one of Netbank´s three trading services, in addition to the book-entry account. With the service you can submit buy and sell orders and monitor their status and the value of your investments.
Share prices are typically volatile. This is why shares often have higher expected returns than fixed-income investments. But the higher return also comes with a higher risk. The best way to reduce the overall risks is to diversify your investment.
There are many different ways you can add diversification to your portfolio, such as sector diversification, geographical diversification and time diversification. You can also lower the risks by investing in other asset classes, including fixed-income investments, funds or other investment products. Read more about diversification and why it's important.
The return on equity investments is based on the potential rise in the share price and on dividends.
Many people invest in equities primarily due to expectations of a rise in share prices. However, share prices may also go down, in which case the return for the investor may be negative. If the investor decides to sell the shares at this point, they may incur an investment loss and lose some or all of the capital invested.
Share prices tend to fluctuate more than the prices of bonds, and therefore equity investments are riskier. On the other hand, equities can be expected to deliver a higher return in the long term.
Dividends are profit sharing payments, paid out by companies (usually limited liability companies) to their shareholders. Most companies in Finland pay dividends once a year.
Decisions on whether to pay out dividends are made by the annual general meeting of shareholders, which also decides on the dividend amount. Equally, the annual general meeting may decide that no dividend will be paid in cases where the company has, for example, recorded a loss or needs capital for investments. This is the reason growth companies tend to pay smaller or no dividends.
Nordea Investor allows you to easily follow the markets any time, any place.
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