| The growth asset class is normally called the equity | | | | Objective of Holding Equities |
| asset class, and for very good reason. This asset | | | | Investors will hold equities for one simple reason: |
| class is normally synonymous with capital appreciation, | | | | they want to experience financial growth through |
| something that is most commonly achieved through | | | | capital appreciation. This is the primary goal with |
| equity investments. | | | | these investments and over time they have provided |
| More Than Equities | | | | the quickest and steadiest growth rates than any |
| However there is a lot more to the growth class | | | | other asset class. |
| than just equities. Derivatives, commodities and | | | | The problem, however, is volatility. Investors who |
| precious metals offer great opportunities for growth | | | | are unable to stomach the risk of loss associated |
| as well, yet none of these assets are considered | | | | with volatility will have a tough time investing in the |
| equities. | | | | growth class as a consequence of their inability to |
| Since a lot of the non-equity investments that offer | | | | tolerate risk. |
| growth can be purchased by your average investor, | | | | Who Should Hold Equities |
| it is therefore simpler to refer to the growth class | | | | Unfortunately, anyone who intends on growing their |
| simply as the equity class. | | | | portfolio, such as planning for retirement, will need to |
| Purpose of Equities | | | | resort to growth assets. As well, people who want |
| Probably the biggest reason why the growth class is | | | | to replace burnt capital, such as people who are |
| often referred to as the equity class has a lot to do | | | | spending during retirement, will also need to hold |
| with the limitation of risk. Unlike precious metals, | | | | equities. |
| commodities and derivatives, an investor can take a | | | | The difference is how much, as a percentage of |
| tangible ownership (equity) position in a security, | | | | their total portfolio, each type of investor will hold in |
| company or other asset (like real estate). This limits | | | | their portfolios. The only type of investor who will |
| the risk -- precious metals for example can be lost or | | | | not need to hold equities in their investment portfolio |
| stolen and can be rendered untracable, just as | | | | is one whose goal is to either keep their portfolio |
| commodities and derivatives can expire worthless; | | | | safe at the cost of capital depreciation (including |
| equities on the other hand can be held indefinitely. | | | | purchasing power loss) or the goal is to spend the |
| In that regard, the growth class is arguably the most | | | | value of the portfolio over a given period. |
| volatile and risky. Even equities themselves will | | | | Summary |
| fluctuate more than will assets in other asset classes. | | | | As part of the growth asset class, equities offer |
| But since there is more risk, there is also a lot more | | | | opportunities for growth. The equity asset class itself |
| opportunity (the class itself is littered with | | | | is a large class and can be further broken down into |
| sub-categories and alternate classes). This not only | | | | specialized classes and sub classes and categories. |
| allows for diversification within the class itself, but | | | | The objective with equities is to achieve growth |
| enhancements through other similar assets within the | | | | through capital appreciation and investors who do not |
| class (e.g. a core stock portfolio with smaller portions | | | | want to burn through their capital base will need to |
| of specialized equity assets). | | | | hold equities in their portfolios. |