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Posted on 18 September 2012.
An equity investment is similar to other investments. However, when you invest in the equity of a company, you become owner of a part of the company without taking possession of the certificates or securities themselves. In order to receive returns on your investment, you rely on an account manager who keeps the certificates in his or her possession.
These shares also demonstrate ownership in the company’s debt. The money used to purchase equity investments acts as a sort of loan made to the company. The business pays this loan back with dividends. However, if the company performs poorly, the shareholders may not receive anything.
Many people have become fans of equity investment in the last few years. As the economy has struggled to hold itself together, many investors have despaired of making real gains with traditional stock investments. In fact, some people are only looking to equity investment scenarios as a way to protect their money rather than earn profits.
A number of people have turned to this style of investing as a substitute for traditional pension and retirement planning. They hope that their investments in the equity of companies will do better for them in the long-term than investments in bonds and cash. Many of these investors are worried that government bonds will become valueless and that the value of cash will be inflated away. They put their trust in the future dividend yields from these companies.
Some investors are concerned that people’s hopes are too high for these investment schemes. Dividend growth has slowed considerably in the past decade and does not show any sign of picking up. Equity investment may be facing the same struggles that every other sort of investment has confronted since the crash of 2008.
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