Yourmentor

[Equity Series]

Session 2: Why Invest in Equity?


We are glad to have you with us for our 2nd Session on Equity –Why Invest in Equity?

Alright so let’s get started…


Why Invest in Equity?
Why Invest in Equity?
  • The inflation bug eats into the purchasing power of our hard earned money. Hence, while we save a portion of our disposable income, it becomes imperative to invest in wealth creating asset classes. Equities are an effective wealth multiplier over the long term.

  • Historically equities have performed better than other asset classes during periods of high inflation albeit with higher volatility, which is a trait of equity investing.

  • Equities can help you plan for long term financial goals such as buying a dream home, a car, planning for child’s future (i.e. their education and marriage needs) and even your own retirement.

  • Investing in equity can reward you in two ways – Dividends and Capital Appreciation.



Performance of Indian equity market over the long term

Over 10 years                                                           Over 20 years

         

Base= Rs 100
(Source: ACE MF, PersonalFN Research)
Performance as of October 30, 2015
Past performance may or may not be sustained in future.



Here you can see the long term performance of Indian equity markets as represented by S&P BSE Sensex. Well, over the long term, say a period of 10 years, the Indian equity markets have clocked a return of around 13% CAGR and while over 20 years the markets have delivered a healthy return of around 11% CAGR, thereby outperforming the average 8%-9% returns clocked by fixed deposits and fixed income instruments. Moreover equities have beaten the inflation bug. So clearly, there are reasons to invest in equity which may help you create wealth in the long run.

But you need to

Follow the right investment approach

Why Invest in Equity?

  • You should invest in equity only for the long term i.e. over 3 – 5 years…or even more. If you have a short investment horizon, stay away from investing in equities.

  • Recognize your age, income, expenses, assets & liabilities, financial goals and nearness to financial goals before investing in equity.


  • If you do not have expertise of investing in equities, you can simply invest in Equity Mutual Funds (…and leave it to professional hands and reap the benefits.

  • Following a systematic approach while investing in equities through mutual funds can help you with rupee cost averaging and generate significant returns in the long run

  • Don’t indulge in trading or excess churning. It can be hazardous to your wealth and health. Remember, a trader is only good until his last trade.

  • Do your own analysis even while buying into equities through mutual funds.

  • You should invest in equity mutual funds with robust fundamental and promising future.

  • And last but not the least, seek help of an expert if need be.



So to end our today’s learning exercise we now invite you to test your learning by taking up this simple quiz

Just Click on the link below