Shares are a way to own a stake in a company. When companies need money to grow or develop new products, they issue shares for people to buy.
Share prices can change over time and are affected by things like how well the company is doing, the overall economy and even big world events.
Investing in shares can help your money grow, which is why it’s a popular choice for building long-term wealth.
But remember, share prices can go down as well as up and you could get back less than you invested. You can reduce this risk by spreading your investments across different types of companies.
At Vanguard, you can invest in shares by buying funds. These funds contain hundreds, if not thousands, of individual shares, making it a low-cost and easy way to diversify your investments.
Shares, also known as stocks or equities, are a way to own a stake in a company. When companies need capital to grow, develop new products or expand their operations, one way to raise money is to issue shares to the public.
How share prices work
Share prices can fluctuate over time and are influenced by various factors. These include the company's financial performance, economic conditions, market trends and even global events. For example, a company that reports strong results might see its share price rise, while a downturn in the economy could cause its share price to fall. As a shareholder, or part owner of the company, you share in its successes and failures.
Rewards and risks of investing in shares
Investing in shares can be a powerful way of growing your wealth over the long term. Historically, shares have provided higher returns than cash over long periods and have outpaced inflation1 by a larger margin.
However, it's important to remember that share prices can go down as well as up, and you could end up with less than you initially invested. To mitigate this risk, diversification is key. By spreading your investments across different types of companies, industries and regions of the world, you can reduce the impact of any single company's performance on your overall portfolio.
Balancing shares and bonds
Another way to reduce risk is to hold a mix of shares and bonds2 in your portfolio. Shares generally offer higher potential returns but come with greater swings in prices. Bonds, on the other hand, are typically more stable but offer lower potential returns.
The mix of shares and bonds in your portfolio should reflect your goals and attitude to risk. A young person who is saving for retirement, and who is willing and able to accept the risk that comes with investing, can afford to allocate more of their portfolio to shares than bonds. In contrast, someone who is retiring in a few years’ time, or who is more cautious, should typically skew more of their portfolio towards bonds.
Investing with Vanguard
At Vanguard, you can invest in shares through our funds. These funds contain hundreds, if not thousands, of individual shares, making it a low-cost and easy way to diversify your investments.
You can do this yourself by choosing from our wide range of low-cost individual funds. Or you can keep things simple by picking one of our LifeStrategy funds or Target Retirement funds, which combine different types of investments in one ready-made portfolio.
1 Inflation is the rate of increase in prices for goods and services.
2 Bonds are a type of loan issued by governments or companies, which typically pay a fixed amount of interest and return the capital at the end of the term.
Investment risk information
The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.
Vanguard Target Retirement Funds and Vanguard LifeStrategy®Funds may invest in Exchange Traded Fund (ETF) shares. ETF shares can be bought or sold only through a broker. Investing in ETFs entails stockbroker commission and a bid- offer spread which should be considered fully before investing.
For further information on risks please see the “Risk Factors” section of the prospectus on our website.
Important information
Vanguard only gives information on products and services and does not give investment advice based on individual circumstances. If you have any questions related to your investment decision or the suitability or appropriateness for you of the product[s] described, please contact your financial adviser.
For further information on the fund's investment policies and risks, please refer to the prospectus of the UCITS and to the KIID before making any final investment decisions. The KIID for this fund is available, alongside the prospectus via Vanguard’s website.
This is designed for use by, and is directed only at persons resident in the UK.
The information contained herein is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information is general in nature and does not constitute legal, tax, or investment advice. Potential investors are urged to consult their professional advisers on the implications of making an investment in, holding or disposing of shares and /or units of, and the receipt of distribution from any investment.
The Authorised Corporate Director for Vanguard LifeStrategy Funds ICVC is Vanguard Investments UK, Limited. Vanguard Asset Management, Limited is a distributor of Vanguard LifeStrategy Funds ICVC.
Issued by Vanguard Asset Management Limited, which is authorised and regulated in the UK by the Financial Conduct Authority.
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