InvestorQ : What is the value that equities add to your portfolio; is it wealth or is stability of returns?
Dawn Cherian made post

What is the value that equities add to your portfolio; is it wealth or is stability of returns?

Answer
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Juvina Maggie answered.
1 year ago


If debt brings stability and predictability to your portfolio why do we need to have equities in the portfolio? Equity is about long term returns. When you buy equities you become part owner of the company. When companies perform well or when they disrupt markets, it is equity that sees maximum accretion in value. Remember the cases of companies like Infosys, Wipro, TCS, Havells and Eicher. Of course, if you don’t want to get into equities directly then you can go via the mutual funds route. The moral of the story is that equities create wealth over the long term, although they add to the volatility in the short term. If you put all your money in a liquid fund then it will be very safe. However, a liquid fund gives you 4.5% net of tax. It will take you nearly 16 years to double your money and you are unlikely to create any worthwhile wealth in your life time. Portfolio investments are about creating wealth in the long run and your investment strategy has to be built on that. Whether you invest in direct equities or in diversified mutual funds, there is the logic of wealth creation to equities.