An equity portfolio is an investment portfolio comprised of equity investments of various sizes and origins. Equity is an ownership interest in a company, with the most common example being stock, where people buy a share in a company and receive stock certificates to document the purchase. A person who holds this type of portfolio wants to build wealth with the proceeds from those equity investments. In addition to being held by individuals, such portfolios can also be managed as a fund with a pool of investors contributing money to purchase investments.
There are several ways people can make money from an equity portfolio. One is dividends. Companies periodically issue payments to their shareholders to share in the profits from a given time period. If people hold equities long enough, they can receive one or more dividends from their investments. The frequency of dividends varies, depending on the company and its policies. Some companies may want to invest their profits in growing the company with the goal of generating larger proceeds in the future, rather than paying dividends. Older, more established companies, on the other hand, may issue more regular dividend payments.
Capital gains is another option. To receive income from capital gains, people sell their equities, profiting on the difference in value between the time they purchased the investments and the time they sold them. People must balance sales well to hit the point when they are likely to make the most money. The equity portfolio may have a number of growth stocks so people will have a pool of resources to draw upon for potential sales profits.
Some investors prefer to handle their own equity portfolios. Others may turn the task over to a financial adviser or broker. The equity portfolio manager is responsible for making sound investment decisions on the client's behalf and may need to meet specific investment targets, depending on the agreement between investor and manager. Most firms will not guarantee results because the market can be unpredictable, but must be able to provide statistical information about their performance so people can determine if working with a specific company would be a wise investment move.
To distribute risk, people usually have a mix of equities in their portfolios and they may use other investment vehicles as well. This allows them to absorb losses in the event of volatility. Depending on how people structure a portfolio and what they are using the investments for, it may be possible to qualify for tax benefits like breaks on equity portfolio investments people are using to prepare for retirement.
