Every fund manager and financial planner has a single piece of advice for retail investors: Stay invested inequities for the long term. And, whether it is retirement corpus, children’s education or any other long-term goal, the same advice is given out.
How long is long-term? When returns over five years or eight years are bad, investment planners are quick to say the tenure should be longer.
At the very outset, let’s set the record straight. Equityinvestments are fruitful over the very long 20-year term. According to data compiled by Business Standard Research Bureau, a lump sum amount of Rs 1 lakh invested in the BSE Sensitive Index, or Sensex, in July 1996 would have grown to Rs 7.33 lakh (compound annual growth rate of 10.48 per cent). In comparison, the same amount invested in gold (India/per 10 gm) would have become Rs 6.1 lakh (CAGR 9.55 per cent) and in a State Bank of India one-year fixed deposit would be Rs 4.6 lakh (average 7.95 per cent).
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