I don’t have much equity exposure may be 5% of my portfolio will be direct equity exposure. Every one I meet advice me to increase Equity allocation (I am 33 years old) and has got 0 debt, own house etc.
So the question is why do you guys advocate Equity exposure when the fact is that over a period of time, even Fixed Deposit with interest accumulation gives comparable result though a bit less mainly owing to Tax implications but without any risks.
To illustrate my point lets compare present 9.25% fixed deposits in nationalised banks like Bank Of India and HDFC Top 200 which I believe is most common choice.
Fixed Deposit (with interest) annualized
5 Year : 11.60%
10 Year : 15.00%
16 Year : 21.00%
HDFC Top 200 G (Source : http://valueresearchonline.com/funds/newsnapshot.asp?schemecode=104)
5 Year : 10.15%
10 Year : NA
16 Year (since launch) : 22.00%
As you can see from above it’s debatable whether the risks are worth 2-3% extra (after tax) that you may gain (what if DTC removes tax inequlity)? Also do you honestly believe that past performance of Indian economy (95-2005) can be repeated? I have severe doubts about the second one.
Please discuss… The purpose of the post is to learn more about value investing and think more about my own options.