What to remember when investing in equity
Call it a tradition or the inability to take and understand risk – for generations we have been favouring gold and cash as our key investments, but historical performance has proven time and again that equities deliver without fail over the long term. We know how people have seen their portfolio values plummeting to less than half in the famous market crashes, how people lost their life long savings. But that’s just one side of the story. When invested carefully and with discipline, equity investment has helped investors meet their financial goals, which wouldn’t have been possible with investments in gold or bonds. People have even made fortunes with investment in equity – picking the right companies and holding on to them despite the market levels.
In fact truth be told, equities have offered the highest returns and have been proven to be safer than even the top-rated government bonds if held for a longer period (>25 years).
So the big question is – What to remember about investing in equity
• The longer you stay invested in equities, the less significance timing your investment in equities hold.
• Higher return always comes with higher risk, so we need to understand that while risk cannot be eliminated, it can be managed with right selection and disciplined investment.
• Inflation is the ugly truth and you need to realise that in the long term inflation will eat away your purchasing power. The bigger risk comes from not taking any risks. So if you want to preserve or increase your wealth risk is your friend.