On a broad and diversified basis, there is a very high probability that Indian equities will outperform over the longer period (over 7 years). However, there are a few caveats. Firstly, buying a portfolio of frothy stocks at the peak of frenzy is not a great idea. Buying tech stocks in 2000 or real estate stocks in 2007 or capital goods in 2010, are not great ideas. The concentration risk is just too high. Secondly, there has to be a constant process of review and revitalization of the portfolio. This includes removing the laggards, re-allocating to winners and consolidating on returns. These can be best achieved by a high quality equity mutual fund with a great track record.

The message for investors is clear. Focus on quality equities as the preferred asset class, use a quality fund management vehicle to participate, avoid outlier investing and stay put for the long term. As long as you are in Indian equities, you are poised to outperform other asset classes! The most important thing to avoid is trying to time the market. Also avoid concentration in a few sectors or themes as they can work to your detriment in the long run. The risk is just too high to justify the returns on risk adjusted basis.