Equities, also known as stocks, are a type of investment that can be a key piece of your overall portfolio. Owning equities lets you own part of a company and could give you a say in certain company decisions through voting (typically associated with common stock). Over time, stocks can be a good way to help grow your money if share prices increase as the company performs well or if the company declares and pays dividends.
Equity shares are traded between investors in the stock market. When you own equity shares, you own a share of the company. The goal of investors is to buy equity shares that will earn a positive return (but there's no guarantee of appreciation). Here's how it can happen:
This is the increased value of a stock over time. A stock's price fluctuates based on available shares and the demand for them. And many factors can impact supply and demand including inflation, interest rates, and company performance.
This is a way for companies to share in the growth of the business beyond its stock price. A company may choose to declare and pay shareholders dividends (either as cash or stock) when the company's revenues exceed its operating costs.
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What are the historical returns for equity investments?
Based on the S&P 500 over the last 20 years,2 the average return of stocks has been about 10% per year. Our time-tested, disciplined approach to investing seeks to generate returns consistent with the broader market over the long term. So no matter what’s happening day-to-day or year-to-year, our strategy is to focus on long-term growth, asset allocation, and diversification.
Keep in mind, all investments have some level of risk, including the potential loss of principal up to the full value of your investment, and no investment strategy can guarantee gains or protect against loss.
Explore the ways Northwestern Mutual can help you invest in equities.
Investing in equities can help you reach your goals
In the U.S., stocks have consistently earned a greater return than bonds over time.2 While there's a greater potential for loss compared to bonds, investing in stocks and mutual funds can play an important role in saving for long-term goals like college or retirement because they could be used in strategies designed to keep or out-pace inflation over the long-term.
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