How equities work Where you can invest: When you buy equities, you become part-owner of a company, and so you can have a share in its profits. Clearly, there is also the Equities potential for loss if the company goes bankrupt or if the shares are worth less than when they were bought. Ways to invest You can buy equities yourself or you can invest in a fund that buys a wide range of equities. A fund can spread risk between a mix of different equities from different businesses across a range of industries and countries. However, any income paid out by the fund to you won’t be fixed because the mix of equities it holds usually changes over time. In addition, your investment can go up as well as down and you may not get back your original investment. For more information see our Spin-free guide to equities. There are two ways you can potentially receive a return from your investment: Equities are shares in a company, so A change in the share price Dividends investing in shares The value If the company does well, its shares are likely to Some companies also pay a portion of their profits makes you part-owner of your become more desirable, which means the price to shareholders in the form of dividends. These of the business investment is 1should rise. This means your investment will 2 aren’t guaranteed, as they depend on the company’s likely to rise or probably be worth more than you paid for it when business strategy and how well it is doing. In some fall with the you come to sell it. cases, companies prefer to reinvest most or all of You could also company’s their profits back into their business with the aim receive a share successes or On the other hand, when a company struggles, the of driving future growth. of the company’s failures share price may fall, so the value of your investment profits in the form will drop as well. If you invest directly in shares, any dividends will of dividends be paid to you. However, if you invest through a fund (these are introduced on page 10), the dividends will be paid to the fund. You can then choose whether you want to receive them as a regular income or reinvest them to increase the size of your investment. 7