Equity Investment – Long Term

POSTED BY Kapil ON May 2, 2012 12:13 pm COMMENTS (4)

The day I landed on the forum, I have been hooked to it. I religiously visit it everyday and have gain a lot on each passing day. It has given me great insight into my financial world which was previously completely ignored.

Well, of many things that I learnt, one was that equity funds is definitely the best instrument when you have a long term goal to achieve. [Long term ~ 15-20 yrs].

Since, I am still quite naive in the area and trying to understand and build a portfolio for myself [after buying a term plan, a PA, and a mediclaim policy for self and family], but then when I come across opinions like below, I lose confidence and forces me to think that PPF/FD are best instruments (as my parents suggests)? Pls. give your expert opinions.

“I have been a die-hard fan of equities for 2 decades..but not anymore. The old wisdom that equities are good in long run does not hold good anymore. In the past, the world was not integrated as much as it is now. Somewhere in the world, there would always be some bad news every other day…and the nervous market will will go down. Then the market will rise again based on local fundamentals..but go down again due to some global news. Also, coalition driven politics in India will make sure that every other day, there is some bad news. Some regional politician will blackmail the central govt. and hold important decisions. So how can equities give good returns even in the long run when the returns are no longer driven by the fundamentals of the stocks that we invest in? It is better to get 2-3% less in debt and sleep well. A small erosion in wealth is much better to live with than a serious threat to the entire wealth”

4 replies on this article “Equity Investment – Long Term”

  1. Kapil Malhotra says:

    Thanks justgrowmymoney and Ramesh for your valuable inputs. I am sure others might have as well been benefited from the answers.

    1. Dear Kapil, Eq. at least has the potential to provide real returns. Debt in long term ‘ll not provide real returns. Here real returns means the returns you ‘ll get in excess of inflation rate.

      So practically when inflation is 8-9%, your real return from PPF or bank FDs is either zero or negative.

      think over it.



  2. Ramesh says:

    Whenever you are in doubt, do this:
    1. If you do not have a written policy / investment statement of how and why of what funds/equities/FD/investment decisions you have made, MAKE it now (you just require a pen and paper). That way, you will not be ruled by emotions.

    2. Whenever you come across such a statement (whether pro or anti), go back to your written analysis.

    3. Do your own analysis. Give time to your thoughts. In the initial (1-2 years), you will feel a kind of new thrill with every new idea, but if you go systematic, you will become a veteran.

    4. Be open to other ideas, but do not follow just about every type of statement.

    5. There will always be bull and bear markets / phases everywhere. You just need to strategise how well you can do and how you can take advantage (if at all, it is possible to do in a statistically significant manner).

    6. Bull markets climb over walls of fear!

    7. Analyzing economic outlook and policy things is a waste of time. Remember the same thing was in Jan 12 too, when the markets rose by 15-20% across the board. So…

    Keep reading and Keep investing. Keep things simple.


  3. Kapil – Policy paralysis in India has always existed. All said and done markets value growth in the long run. India growth story though marred by several recent happenings is still intact. That will eventually translate into stock market returns.

    For investing in equities vs PPF check this thread: http://localhost/jagoforum2/sip-vs-ppf/2729/

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.