It is every investor's dream to get high, yet, secure returns. This proverbial pot of gold at the end of the rainbow can be real if you stay invested in equities long enough. If you consider the rolling Sensex returns over different time periods, (1, 3, 5, 7, 10 and 15 years), the results reveal that as the investment horizon increases, the probability of loss drops. You never lose money in the long run, yet stand to get decent returns. Since its launch, the Sensex has grown at a CAGR of 15.27 per cent.
Equities has been the best performing asset class in India over the past 5, 10 and 15 years and it is likely to be the best performing asset in the coming decade too. According to a Morgan Stanley research, the Sensex is expected to deliver annual returns of 14 per cent over the next 10 years.
Also, Indian equity returns are likely to be less volatile in the coming decade than they were in the previous 10 years. As far as volatility is concerned, the research points out that return volatility in the coming years is also likely to be reminiscent of the post-1987 period, when the volatility in equity returns moderated after hitting a peak. The fundamentals of the Indian corporate sector are in a good shape backed by the strong domestic growth (on the back of robust domestic demand), robust balance sheets, high capital efficiency and the likelihood of decoupling from the rest of the world. This will be a source of strength to the market in the medium to long run. Thus, on a risk-adjusted basis, equities are likely to be the most attractive asset class in the future.
