Today is 9th of April 2020, Exactly 10 days back a financial year ended and you are looking at your investment thinking of gaining something. However, amidst this global pandemic, your equity portfolio is giving you heart attacks. You had invested to create wealth but in this economic crisis, your wealth got eroded sharply.
This 2020 might be the 5th year of investment for some, and yet seeing their wealth gets eroded must make you feel like being cheated. So here, the question is how much longer one needs to be invested to get a reasonable long-term return. And, how long one must continue their portfolio?
Let’s first know what is long term investment
Long term is ideally more than a few years; long-term differs from person to person. It all depends on your goal. In case of equity growth funds where you get compounded returns and returns are subject to market risks so there is no fixed return, the length of time you remain invested does play a role in the outcome that you get.
For an investment there is no defined long term, it could be 5, 7, 10, or 15 years depending on their own goal or objective. An asset is defined as a long-term when its ability to generate a return at a consistent pace continues for many years. For example, a long-term bond has an interest coupon spanning 10, 20, 30 years. A long-term investment in equity stocks means buying shares or investing in equity mutual funds and holding for many with expectation with businesses to continue generating profits and remain cash flow positive for many years, thus, reflecting in stock price and the resulting NAV trends.
So, in times of panic, one must know that investments take time to reach the optimum and in giving that time there tends to come some bad times so what you need to do is keep patience in the time of low.
Because return in the short term in equity can be very uncertain and volatile. So in long-term scenario in case you find yourself in the unlucky period, the wise decision is to stretch your investment horizon.
Happy Investing!
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).