Elearnmarkets - Financial Market Learning
  • Categories
    • Basic Finance
    • Derivatives
    • Financial Planning
    • Fundamental Analysis
    • Technical Analysis
    • Marketshala
    • Miscellaneous
  • Language
    • English
    • Hindi
    • Bengali
No Result
View All Result
  • Courses
  • Webinars
  • Learn On Elearnmarkets
Elearnmarkets - Learn Stock Market, trading, investing for Free
  • Categories
    • Basic Finance
    • Derivatives
    • Financial Planning
    • Fundamental Analysis
    • Technical Analysis
    • Marketshala
    • Miscellaneous
  • Language
    • English
    • Hindi
    • Bengali
No Result
View All Result
  • Courses
  • Webinars
  • Learn On Elearnmarkets
Elearnmarkets - Learn Stock Market, trading, investing for Free
No Result
View All Result
Home Basic Finance
778_ELM_Blog Image_800 x 400_pix

Why is Equity Investment necessary in our Portfolio?

Elearnmarkets by Elearnmarkets
September 5, 2022
in Basic Finance, ETFs & Mutual Funds, Financial Planning, Personal Wealth, Retirement Planning
Reading Time: 5 mins read
0
1.4k
VIEWS
Share on FacebookShare on TwitterShare on WhatsApp

Listen to this :

Every individual has some financial goals like retirement, medical plan, child’s education, traveling, getting a new house, car, etc and accordingly, prepares for financial planning and wealth management to meet these financial goals.

Our expectation is to earn maximum returns out of these assets to reach our financial goal. Keeping high returns in mind, we should have enough equity investment in our portfolio to achieve higher returns.

For earning maximum returns out of these assets to reach our financial goal you can take help of Kredent Money App.

While there are many asset classes available, in this blog we are going to understand the importance of equity investment in our portfolio and maximization of returns.

Reasons for equity investments

– Stocks or Equity Mutual Funds or ETFs have better growth potential compared to bonds and short-term investments

Join TMP Join TMP Join TMP

Stocks or equity funds have consistently earned a better rate than bonds over longer term. Despite ups and downs in equity market, investors have earned superior return if they are patient and are able to ride the downturn. The Indian stock market index or Sensex grew at a CAGR of approx. 16% p.a. since its inception in 1979. While bond investments on an average gives 7-8% return. A major portion of our investment portfolio should be in equities if we want those higher returns.

Sensex and Bond returns

– Stock markets are volatile but if you are saving for long-term goals you can overcome stock market downturns

If you remain invested for long period of time, you can overcome downturns in stock market. Historically it has been observed that after every downturn, there has been massive upside in equity markets.

– You should have a diversified portfolio

You have to be careful with the types of stock you invest in. Enough importance should be given to the quality of the stocks. Quality stocks always rebound after any major fall. Also, we must invest in a variety of stocks to diversify our portfolio because if few stocks are down it will be balanced by rise in other stocks.

“Never put all your eggs in one basket”

If you are someone who is not an expert at picking stocks, invest in equity mutual funds managed by fund managers. Fund managers are professionally trained experts who manages a portfolio of stocks for retail investors. However, do some proper research before choosing a particular equity fund or a fund manager. Check the past track record of the fund as well as the fund manager. Take help of a financial adviser in choosing funds and building a portfolio according to your financial goals.

You don’t have to invest everything in equity, some portion of your portfolio should consist of low-risk assets like debt and fixed deposits.

There should be an appropriate mix of equity, bonds and other short-term assets in your portfolio. Investment in variety of assets provides diversification to your portfolio. Having all your savings in equity will be too risky, especially if there is a recession and it takes a lot of time for the market to recover.

Why equity investment gives us confidence?

India, an emerging economy is maintaining a GDP growth rate of 7% (approx.). With little improvement in growth rate or even at this rate, our equity markets are expected to do well in near future.

India has a huge young population which provides massive demographic advantage. A lot of families are expected to move into middle class and upper middle class. Discretionary spending will increase. Government schemes like “housing for all” and “smart cities” will lead to capital expenditure by government. Credit boost by government schemes like “mudra yojana” will help the economy grow. Investors need to observe and study which sectors and companies are going to be most impacted by the underlying growth factors.

These are common asset classes that we invest in:

  • Equity
  • Debt/ Fixed Deposits
  • Real Estate
  • Gold

Comparison

Why do we have so many asset classes?

Each asset class serves a specific purpose as per their nature. They help us diversify our investment. Diversification helps to avoid the risk of losing everything in case of poor performance of any one asset class.

Equity investment has the potential to deliver highest return. (over longer time period)

Debt/Fixed Deposit gives protection of capital and but gives lower return.

Real Estate investment requires huge capital, is illiquid in nature and if the location is not appropriate, earning rental income or value appreciation over time is difficult.

Return on gold is usually low, or it will just beat the inflation, in which case investing in gold for financial goals is not prudent.

Equity and Debt are such asset classes where all investors can participate and there is more than one way in which one can invest in them.

Portfolio adjustment as per risk bearing capability

Younger people who have time for investment to grow and compound should have a major portion of their portfolio in equities (say 60-65%). While risk-averse and elder Investors should have more of debt, liquid assets and lesser equity (less than 30%) in their portfolio.

Key Takeaways

  • Invest in equity to gain higher returns.
  • Stay invested in equity for longer period of time.
  • For short term investments, prefer bond funds and liquid assets.
  • Portfolio should be well diversified and at the same time have assets which can meet financial goals.
  • Investment in equity should also consider risk taking ability of the investor.
Tags: basicequity investmentfinancial goalLong term investingportfolioportfolio diversification
Share16TweetSend
Previous Post

How to successfully trade Cup and Handle pattern?

Next Post

How Changing Preferences increasing the share of Consumer durable?

Elearnmarkets

Elearnmarkets

Elearnmarkets (ELM) is a complete financial market portal where the market experts have taken the onus to spread financial education. ELM constantly experiments with new education methodologies and technologies to make financial education effective, affordable and accessible to all. You can connect with us on Twitter @elearnmarkets.

Related Posts

5 Best Practices in Your First Year of Stock Market Trading 1
Basic Finance

5 Best Practices in Your First Year of Stock Market Trading

May 15, 2023
1.4k
Understand the MSCI Index and its Rebalancing Impact on the Indian Stock Market 2
Basic Finance

Understand the MSCI Index and its Rebalancing Impact on the Indian Stock Market

May 12, 2023
2.2k
Tax Planning - 7 Changes in the Indian Financial Environment that you need to know this Financial Year! 3
Basic Finance

Tax Planning – 7 Changes in the Indian Financial Environment that you need to know this Financial Year!

April 18, 2023
1.3k
Financial Calendar 2023-2024 - Remember these Important Dates for Tax Planning, Advance Tax Payment, and Investments! 4
Financial Planning

Financial Calendar 2023-2024 – Remember these Important Dates for Tax Planning, Advance Tax Payment, and Investments!

April 12, 2023
1.2k

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Follow Us

Facebook-f Twitter Instagram Linkedin-in Youtube Telegram

Register on Elearnmarkets

Continue your financial learning by creating your own account on Elearnmarkets.com

Register Free Account

Download App

Categories

  • Basic Finance
  • Derivatives
  • Financial Planning
  • Fundamental Analysis
  • Technical Analysis
  • Marketshala
  • Miscellaneous

Popular On Elearnmarkets

  • Market Superheroes:
  • Vivek Bajaj
  • Chetan Panchamia
  • Ashish Kyal
  • Premal Parekh
  • Abhijit Paul
  • Jegan
  • Sivakumar Jayachadran
  • Vishal Malkan
  • Jyoti Budhia
  • Vivek Gadodia
  • Vishal Mehta
  • Piyush Chaudhry
  • Santosh Pasi
  • Gomathi Shankar
  • Market Superheroes:
  • Vivek Bajaj
  • Chetan Panchamia
  • Ashish Kyal
  • Premal Parekh
  • Abhijit Paul
  • Jegan
  • Sivakumar Jayachadran
  • Vishal Malkan
  • Jyoti Budhia
  • Vivek Gadodia
  • Vishal Mehta
  • Piyush Chaudhry
  • Santosh Pasi
  • Gomathi Shankar
  • Courses:​
  • Options Trading
  • Dow Theory
  • Momentum Trading
  • Stock Investing
  • Stock Market for Beginners
  • Harmonic Chart Patterns
  • Algo Trading
  • Elliot Wave Theory
  • Advanced Excel
  • Cryptocurrency
  • NSE Certification Course
  • Courses:​
  • Options Trading
  • Dow Theory
  • Momentum Trading
  • Stock Investing
  • Stock Market for Beginners
  • Harmonic Chart Patterns
  • Algo Trading
  • Elliot Wave Theory
  • Advanced Excel
  • Cryptocurrency
  • NSE Certification Course
  • Webinars:
  • Bank Nifty Scalping
  • Intraday Trading Strategies
  • Options Trading Strategies
  • Options selling
  • Price Action
  • Relative Strength
  • Tax Planning
  • Options Buying
  • Growth Stocks
  • Portfolio Management
  • Relative Strength Index
  • Risk Management
  • Renko Charts
  • Crude Oil
  • Traders Psychology
  • Moving Average
  • Multibagger Stocks
  • Webinars:
  • Bank Nifty Scalping
  • Intraday Trading Strategies
  • Options Trading Strategies
  • Options selling
  • Price Action
  • Relative Strength
  • Tax Planning
  • Options Buying
  • Growth Stocks
  • Portfolio Management
  • Relative Strength Index
  • Risk Management
  • Renko Charts
  • Crude Oil
  • Traders Psychology
  • Moving Average
  • Multibagger Stocks
  • Free Learning Modules:
  • Intraday Trading
  • Options Scalping
  • Swing Trading
  • Financial Modelling
  • RSI Indicator
  • Bollinger Bands
  • Pricing of Futures
  • Personal Finance
  • Initial Public Offerings (IPO)
  • Value Investing
  • Technical Indicators
  • Candlesticks
  • Chart Patterns
  • Option Greeks
  • ELSS Funds
  • Banking and Insurance
  • Real Estate
  • Gold
  • Free Learning Modules:
  • Intraday Trading
  • Options Scalping
  • Swing Trading
  • Financial Modelling
  • RSI Indicator
  • Bollinger Bands
  • Pricing of Futures
  • Personal Finance
  • Initial Public Offerings (IPO)
  • Value Investing
  • Technical Indicators
  • Candlesticks
  • Chart Patterns
  • Option Greeks
  • ELSS Funds
  • Banking and Insurance
  • Real Estate
  • Gold
  • Book Summaries:
  • Rich Dad Poor Dad
  • Psychology of Money
  • The Intelligent Investor
  • The Richest Man in Babylon
  • Think and Trade Like a Champion
  • Value Investing and Behavioural Finance
  • Trading in the Zone
  • Learn to Earn
  • Book Summaries:
  • Rich Dad Poor Dad
  • Psychology of Money
  • The Intelligent Investor
  • The Richest Man in Babylon
  • Think and Trade Like a Champion
  • Value Investing and Behavioural Finance
  • Trading in the Zone
  • Learn to Earn
  • Tools:
  • CAGR Calculator
  • SIP Calculator
  • eLearnOptions
  • Future Value Calculator
  • Present Value Calculator
  • Atal Pension Yojana
  • Cost of Delay Calculator
  • Become a Crorepati
  • Tools:
  • CAGR Calculator
  • SIP Calculator
  • eLearnOptions
  • Future Value Calculator
  • Present Value Calculator
  • Atal Pension Yojana
  • Cost of Delay Calculator
  • Become a Crorepati

© 2023 Elearnmarkets. All Rights Reserved

  • Visit Elearnmarkets
  • Courses
  • Webinars
  • Financial Guides
  • Get Free Counselling
  • Visit Elearnmarkets
  • Courses
  • Webinars
  • Financial Guides
  • Get Free Counselling

Get Elearnmarkets App

No Result
View All Result
  • Article Categories
    • Basic Finance
    • Derivatives
    • Financial Planning
    • Fundamental Analysis
    • Technical Analysis
    • Marketshala
    • Miscellaneous
  • Language
    • Hindi
    • Bengali
    • English
  • Courses
  • Webinars

© 2020 Elearnmarkets All Rights Reserved