Investing in equities: A beginner’s guide

For many first-time investors, the world of equities can feel full of unfamiliar jargon. Stocks, shares, equities – are they the same thing, or do they mean something different? In reality, these terms often overlap, and understanding them is the first step toward becoming a confident investor.

What are equities?

Equities are simply a way of describing ownership in a company. When you buy equities, you’re buying a stake in that business, with the potential to benefit from its future success - either because the equities you hold increase in value or because the company shares a portion of its profits with you in the form of a dividend.

The terms stocks and shares are often used interchangeably with equities, but there are subtle differences:

• Equities is the broadest term, covering the whole concept of company ownership.
• Stocks usually refer to ownership in one or more companies.
• Shares are the individual units of ownership that you can buy and sell.

In practice, investors use these terms interchangeably because, at their heart, they all describe the same idea: a slice of ownership in a company.

What kind of asset are equities?

When you buy a share, you become a part-owner of that business. This ownership comes with certain rights:

• A claim to a portion of the company’s earnings, often paid out as dividends.
• A claim on its assets, if the business ever closes down.
• In many cases, the right to vote on company matters, from electing directors to approving policies.

Unlike bonds (a loan made by an investor to a borrower) or savings accounts, which provide fixed interest, equities are growth assets. This means their value depends on how well the company performs over time. That makes them more volatile in the short term, but potentially more rewarding over the long term.

Why invest in equities?

Equities have historically offered strong long-term performance, often outpacing other asset classes such as bonds or cash¹. While they can be unpredictable year-by-year, over decades they’ve tended to reward patient investors.

Some of the key attractions include:

• Wealth creation. Equities are one of the most popular ways to build long-term wealth, as company profits and growth can drive share prices higher.
• Diversification. By owning equities across different companies, sectors, and countries, you can spread your risk and tap into a wide range of themes, from technology to healthcare to consumer goods.
• Flexibility. Equities can be balanced with other assets, like cash or bonds, to create a portfolio that works for your goals and risk appetite.

Essentially, equities carry risks - such as the potential for short-term losses - but they remain a cornerstone for investors seeking long-term growth.

Why invest in equities through a trust?

Navigating individual company shares can feel daunting. This is where investment trusts offer a helpful solution.

• Expert management. Professional fund managers use their expertise and analytical skills to research, select, and monitor companies – so you don’t have to.
• Built-in diversification. Investment trusts pool money from lots of investors, spreading it across a wide range of companies, industries, and geographies. Some – like us – even use a different range of investment styles. This helps reduce the risk of being too exposed to any single business.
• Income opportunities. Many trusts pay dividends, providing a recurring stream of income. These can be reinvested to harness the power of compounding, or taken out as cash to support your financial needs.

By investing through a trust, you get the combined benefits of professional oversight, diversification, and income potential, all wrapped into a single, accessible investment.

The bottom line

Equities represent ownership, opportunity, and the potential for long-term growth. While they carry risks, they also open the door to some of the world’s most dynamic businesses and industries.

For new investors, trusts could make that journey easier, offering both expertise and balance. They help transform equities from something complex and daunting into a manageable, practical way to grow wealth over time.

Issued by Towers Watson Investment Management Limited (TWIM), registered office Watson House, London Road, Reigate, Surrey RH2 9PQ. TWIM is authorised and regulated by the Financial Conduct Authority, firm reference number 446740. TWIM is the Alternative Investment Fund Manager (AIFM) for Alliance Witan PLC. TWIM is part of Willis Towers Watson.
Alliance Witan PLC is listed on the London Stock Exchange and is registered in Scotland No SC1731. Registered office, River Court, 5 West Victoria Dock Road, Dundee DD1 3JT. Alliance Witan PLC gives no financial or investment advice. © Copyright Alliance Witan PLC. Tel: 01382 938320.
 
This information is for informational purposes only and should not be considered investment advice. The views expressed are the opinion of TWIM and are not intended as a forecast, a guarantee of future results, investment recommendations or an offer to buy or sell any securities. The views expressed were current as of end July 2025 and are subject to change. Past performance is not indicative of future results. A company’s fundamentals or earnings growth is no guarantee that its share price will increase. You should not assume that any investment is or will be profitable. Information contained herein has been obtained from sources believed to be reliable but not guaranteed.

1. Cambridge Judge Business School, Report (23 September 2025): Stocks have far outperformed over the past 125 years https://www.jbs.cam.ac.uk/2025/report-stocks-have-far-outperformed-over-the-past-125-years