Is equities a safe bet as a long term investment?

However, adopting equities for the long term would be the right way to go, and you will see that equities are not a risky investment. This can be best explained by looking at the data of about 26 equity mutual funds that have stood the test of time and are around for 25 years or more. Launched in 1986, UTI Mastershare Fund is the oldest and has given an average 10-year rolling return (with daily shifts) of 12.5% ​​per annum (per annum) between 1997 and 2022. The 10-year rolling return average shows how well a fund will invest in.

Now, let us take the case of a person investing equally in all 26 funds in 1997 and holding them for a period of 10 years. The average return would have been 16.8% per annum between 1997 and 2022. The worst-case scenario for a 10-year tenor for a person investing equally in all 26 funds would have been 9.5% p.a. – which is more than what an investor would have done with a fixed deposit.

Now, let us delve deeper into these 26 funds and take a case where an investor chose only one fund and invested for a tenor of 10 years. The luckiest investor would have made a return of 51% per annum, while the most unlucky investor would have lost 1.9% per annum. % return which means they would have earned more than FD. In 99.4% of cases, i.e. around 142,400 cases, a 10-year investor would have given a positive return, indicating that they have not lost capital.

The above data clearly tells us that equity investing is not risky for a long term investor. Therefore, to achieve your investment goals, you should embrace equity and have a meaningful equity allocation in your portfolio. In addition, risk can be minimized by following some basic principles of diversifying and reviewing your portfolio at regular intervals.

Firoz Aziz is the Deputy CEO, Anand Rathi Wealth