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Equities1 represent ownership stakes in corporations. Typical equities may include common stock, preferred stock, foreign equities and closed-end funds.
An ETF, or Exchange Traded Fund2, is a collection of assets (like an index fund3) of equities, commodities, and/or bonds that is bought and sold like a stock in real-time on a stock exchange. Most ETFs are not actively managed, but instead are designed to track an index. In general the expense ratios of ETFs are relatively low. Because it trades like a stock, an ETF does not have its net asset value (NAV) calculated every day like a mutual fund does.
Both equities and ETFs can offer potential growth from market price appreciation; however, they are subject to market volatility and thus, open to market price risk and potential loss of principal.
Before you invest in equities or ETFs, it's important to weigh the risks against the potential returns and carefully plan your strategy. In addition to utilizing the knowledge and support of your HSBC Securities Financial Advisor, you can leverage unique insights and analysis from HSBC's vast global resources to help you evaluate your investment possibilities. Get started with a complimentary and comprehensive financial review by calling us at 866.586.4722 or by scheduling a consultation online.
1 Equity securities include common stocks, preferred stocks, convertible securities and mutual funds that invest in these securities. Equity markets can be volatile. Stock prices rise and fall based on changes in an individual company's financial condition and overall market conditions. Stock prices can decline significantly in response to adverse market conditions, company-specific events, and other domestic and international political and economic developments.
2 Exchange-traded funds are subject to risks similar to those of stocks. Investment returns will fluctuate and are subject to market volatility such that an investor's shares, when redeemed or sold, may be worth more or less than their original cost. Unlike mutual funds, shares of ETFs are not individually redeemable directly with the ETF but must be bought and sold on an exchange like an individual equity or bond.
3 Stock index funds are passively managed funds, which attempt to replicate the performance of a specific stock market index by investing in the stocks held by that index.
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All decisions regarding the tax implications of your investment(s) should be made in connection with your independent tax advisor.
United States persons (including U.S. citizens and residents) are subject to U.S. taxation on their worldwide income and may be subject to tax and other filing obligations with respect to their U.S. and non-U.S. accounts - including, for example, Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts ("FBAR")). U.S. persons should consult a tax adviser for more information.