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Equity Investment

In: Investment Strategies for Retirement

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  • Franck Nicolas

Abstract

Equities (shares, stocks) represent partial ownership in the company issuing them. Through stocks we participate in the business’ growth prospects. Equity total return consists of two components:DividendsChanges in price (capital gains or losses).The ratio between the dividend and stock price is dividend yield. Equity price reflects the value the market collectively assigns to the company. If the market thinks a company will do well (not do well) in the future, exceeding expectations (its financial results are disappointing), more buyers (sellers) than sellers (buyers) of its stock may push its price upwards (downwards). Whilst the forces of supply and demand set equity price, the forces of fear and greed drive sellers and buyers. Over the long-term, however, daily news and noise wash-out. Prices are linked more closely to the company's fundamental conditions and the general economy.

Suggested Citation

  • Franck Nicolas, 2019. "Equity Investment," World Scientific Book Chapters, in: Investment Strategies for Retirement, chapter 4, pages 127-158, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813272019_0004
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    More about this item

    Keywords

    Retirement Investment Strategies; Pension Financing; Retirement Planning; Personal Finance; Retirement Savings; Asset Management;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

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