Equities Are Your best Friend In Wealth Creation

 Equities are known to deliver inflation-beating returns. At a time when the interest rates are low equities are one's best bet to shield one's wealth from the destructive effects of inflation. Historically equities have delivered stellar returns ranging from 17% to 22% per annum.

The problem with equities is that they are highly volatile. Many equity investors tend to liquidate their holding during volatile times. The net result is that not only the investor loses his leverage but also falls short of accumulating the desired corpus to fulfill his financial goals.

Patience is extremely essential for the success of equity investments. One cannot achieve his long-term goals by looking at short-term volatility. During the historical volatility witnessed during March 2020, many equity investors pressed the panic button and exited their investments in a hurry. This kind of behavior can derail the financial train that can help the investor achieve even the most difficult financial goals.

Consider this, an equity investment of rupees 15000 per month can help one amass the Corpus of rupees 2 crores in 15 years provided the investor sticks to the desired investment plan regardless of the market levels. As 2020 has shown the market always finds its appropriate levels despite unprecedented volatility.

Those who held on to their investments despite volatility are sitting on handsome gains. The Sensex is 150% since March 2020 lows. This clearly shows that patience is the name of the game when it comes to equity investments.

Remember equities will always test your patience. If you have invested in a good fund then you must hold on to it regardless of the volatility. In the long run, the volatility evens out resulting in extraordinary gains.

There are several factors that are beyond the control of retail investors. It is futile to expect extraordinary returns in a short period of time. Once you have invested in equities you should make changes to your portfolio only if you feel that the government policies or the geopolitical risk can negatively affect your investments. As far as government policies are concerned they are formulated keeping the investor's interest in mind, hence what may appear detrimental in the short-term may be beneficial in the long run.

Indian equity markets are quite strong. Several scams have rocked the markets in the past 2-3 decades, and every time the market has bounced back from its lows. Another factor that favours holding the equities for the long term is the power of compounding. The average returns continue to rise if the investor holds the equity for the long term. The words of the legendary investor Warren Buffet rings true when it comes to equity investments, “My holding period is forever.”