The equity portfolio is an investment portfolio consisting basically of shares . Likewise, other assets that have high volatility returns are included.
This portfolio, owned by one or more natural or legal persons, is characterized by uncertainty. The profitability offered to the investor varies greatly over time, and may even record losses in some periods.
However, it should be noted that in the long term a portfolio of variable income will always obtain higher profits. This, in comparison to a fixed income portfolio .
Assets of an equity portfolio
The assets of a variable income portfolio are mainly:
- Actions: Financial securities that represent a small part of the capital stock of a company. Its price depends on the value of the company, which varies depending on various internal and external factors to the business. For example, a geopolitical event may affect the price of a share.
- Convertible bonds: They are debt securities of a company that have the option of becoming shares at a given time. In this way, creditors become partners. It should be noted that it is the holder of the bond who determines if he is interested in being a shareholder.
- Stock warrants: It is a financial derivative that grants the right to acquire an asset (which in this case is an action) after a certain time, for example, three months. Once this period has expired, the buyer has the option to specify the transaction or not.
- Structured products:These are financial instruments that invest most of the capital of the investor in fixed income . However, a small portion is for derivatives whose performance depends, for example, on the performance of a stock index or the price of a commodity .
- Equityfunds: Investment funds that invest exclusively in equity instruments.
Risks of an equity portfolio
An equity portfolio is mainly exposed to two types of risks:
- Specific risks:Are those that are related to the activity of the company that issues the action. That is, they are conditioned by the management of managers and the efficiency of operations.
These risks may decrease with diversification , that is, by investing in different sectors and companies.
- Systemic risks: Are those to which the entire market is exposed. For example, uncertainty in the political environment.