InvestorQ : Do equities outperform only in long term or in short term too?
vaishnavi mhatre made post

Do equities outperform only in long term or in short term too?

Answer
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2 years ago


Equities work best when you hold them for a period of 10 years or more. That is when the downside risks almost get fully eliminated and you get the benefit of positive growth on your portfolio value. Equities have tended to outperform other asset classes across all the four time frames clearly laying out the superiority of equities as a wealth creator over the medium to long term horizon.

The outperformance of equities is due to a mix of the power of compounding and the greater tax efficiency in equities. Since outperformance is across all four time frames, equity emerges as a superior asset class even in terms of risk-adjusted returns.

Different asset classes have tended to underperform inflation across certain time frames. However, equity is the only asset class that has managed to beat inflation across the medium term as well as the long term.