Opinion | Why it’s a myth to say that equity is safe in long term

Almost everyone believes that equity is safe in the long term. For example, almost everyone believes that if you will retire more than five to 10 years later, then it is safe to invest most of your net worth in equity. The data, theory and principles of finance all disagree with this myth. And, sometime over the next decade or so, believing in this myth may have devastating consequences. “Equity is safe in the long term" is a vague statement that we cannot test. A more precise version of this statement is something like, “if you hold equity for five to 10 years, then you can be sure that it will at least match inflation (i.e. roughly match the returns of a zero-risk debt liquid mutual fund) and, on average, it will generate higher returns than inflation".

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