Osaka Corp Investment Solutions Banner

Global Equities

Why equities should be part of your portfolio

Capital committed to investment in the stocks and shares of corporations is recognized as being among the most effective means by which to increase the value of a portfolio. Nevertheless, the return on equity investment is reliant on a number of factors, such as overall economic environment, trading conditions of the sector in which the company operates and investor sentiment. These can all have a beneficial or a detrimental effect on stock prices. Still, with careful analysis of a company's activities and its performance against its competitors, it is reasonable to expect to profit over the long term.

Volatility is not a reason for panic

During volatile periods, investors - quite rightly - tend to be concerned about the value of their investment but it is always advisable to remember that equity investing is for the long term. The truth of the matter is that over the last 25 years, stock markets have withstood fluctuating conditions to significantly exceed the performance of bonds and bank deposits.

While it is true that equities do harbor a greater degree of risk than bonds and cash deposits, as part of a well-diversified portfolio, historically, they have proven themselves to be among the best ways to enjoy capital appreciation and protect against the effects of inflation.

Time is more important than timing

It goes without saying that all stock/equity investors would dearly love to be able to accurately forecast the fluctuations of the market and, in doing so, buy at the bottom and sell at the top.

Unfortunately, market timing is an extremely difficult skill to master, especially in periods of marked volatility. Indeed, getting it wrong – as many do – can have an adverse effect on the overall performance of a portfolio. Over the long term, peaks and troughs in markets tend to even out leaving those who have remained invested regardless of market undulations sitting on gains that those who, trying to predict those movements, tend to miss out on.

Playing the long game

Analysis of the long-term performance of equities leaves one in no doubt that market timing is unnecessary; It is better to be invested than not. The decision to sell at the first sign of a correction can prove particularly damaging to a portfolio's value and it should be remembered that, while it can seem logical for those concerned about additional losses to sell their holdings, there is a very real risk of cementing losses and missing out on market rallies.