How To Balance The Equation of Volatility and Time With Long Term Investments

Every investor seeks a stable and reliable growth against the money they invest. Of all the market-linked investments at the moment, equity investments show the most promise with a range of benefits: liquidity, dividend income, capital appreciation and diversification to reduce risk.

Most novice investors are wary of putting their money in equity securities. However, the vesting period is the crucial factor when trading in equities: the longer you stay invested, the more the risk evens out and the opportunity for capital appreciation grows.

What is a long-term equity investment?

Equity investments have the potential to grow quite well over the years, even more so than debt instruments. They are useful for generating a regular stream of income over a longer time frame. Their innate propensity for risk is also evened out when you stay invested in the long-term equity investment.

You can gain valuable long-term capital appreciation on your money when you have a diversified portfolio comprising a predominant mix of equity and equity-allied securities.

However, do note that the growth of this asset class is subject to market fluctuations. Hence, the fund house cannot guarantee a certain rate of growth, or indeed, growth at all.

On the upside, however, there are tremendous implications for long term investment in equities. They are:

  • Investment in both large cap and select midcap funds.
  • A 3-year lock-in period, amongst the lowest in market-linked options. The money is locked in equity securities and the fund manager can take a decision on how to steer the asset class by factoring in volatility in the interim period.
  • Equity is an asset class that almost always grows enough to beat inflation while creating a good corpus.
  • Long term equity investments are ideal for meeting future milestones, such as financing children’s higher education, starting your own business, creating a retirement corpus, etc.
  • The fund invests in growing and stable sectors like banking, automobiles and auto ancillaries, software, finance, pharma, etc.
  • You receive a regular dividend from the company whose shares you hold. You also get returns via capital gains (via the rise in market price of the share as per market movements).
  • You do not suffer the liabilities of the companies performing badly; the loss of a company you have invested in does not affect your investment.
  • You get voting rights in the companies you invest in – this is a good degree of control.
  • You can also gain higher exposure to the sector or company you invest in with rights shares and bonus shares issued by companies when they require more capital for expansion.
  • The equity investment is highly liquid and you can redeem it any time after the lock-in period.

 Conclusion

The core funda of any investment is very clear. If you are looking for the highest return in a small time frame, then you have to take the maximum risk only. And when we talk about risk, it can be positive or negative. In any normal scenario, if you want to grow your wealth then you have to be patient.

Making money is not at all a simple thing, I am sure you will agree with me. And when people are ready to make money from the stock market, the much necessary thing to consider is how much patience they are with how much knowledge you have.

Anyone can reduce this risk by investing through mutual funds, but again you have to invest continuously in the long term. Because the stock market will be always volatile and in short-term one can’t be in the gainer side always. So better to create a long-term investment schedule to beat this volatility in long run.

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