Importance of Equities:-
Equity has always been known as wealth creators but at the same time are wealth destructors too.
Normally the earning life of people is 25-60. i.e 35 years.
Now Debt Investments like FDs, Debt MFs, bonds etc give you a return between 5-8% depending on the tax bracket you are in.
The Sensex which is the benchmark of the top 30 companies in India has delivered a double digit return of 12% annually. A majority of Equity funds have beaten it with a return of 15% on an average.
That means in your earning lifetime i.e 35 years, if you invest your money in Fixed Income it will double your principal every 12 yrs.
Which is to say:
25- you invest Rs/- 1
37- it becomes 2
49- it becomes 4
61- it becomes 8 and you retire
Inequities
25- you invest Rs/- 1
30- it becomes 2
35- it becomes 4
40- it becomes 8
45- it becomes 16
50- it becomes 32
55- it becomes 64
60- it becomes 128
which is 16 times greater than 8.
Considering a worst case scenario, you will still settle far above 8.
This is a risk? Interim volatility OR retiring with a kitty 120 times less?
T H I N Kš¤š¤
