{"id":173,"date":"2020-01-15T12:31:46","date_gmt":"2020-01-15T12:31:46","guid":{"rendered":"https:\/\/www.invest19.com\/blog\/?p=173"},"modified":"2020-01-15T12:31:48","modified_gmt":"2020-01-15T12:31:48","slug":"how-long-should-be-your-long-term-equity-investment","status":"publish","type":"post","link":"https:\/\/www.invest19.com\/blog\/how-long-should-be-your-long-term-equity-investment\/","title":{"rendered":"How Long should be your Long Term Equity Investment?"},"content":{"rendered":"<div style=\"margin-top: 0px; margin-bottom: 0px;\" class=\"sharethis-inline-share-buttons\" ><\/div>\n<p>The equity\nmarket has gone through numerous cycles over the years. From being deemed as a\nmyth to being one of the quintessential investment options around, the journey\nhas been a breathtaking one. People are now embracing the fact that equity\ninvestment does give better returns than any other investment plans like fixed\ndeposits, gold and more and are venturing into it. Historically saying,\ninvesting in equity for the long term will help generate the best return.<\/p>\n\n\n\n<p>This brings\nus to the word long term investment. We\u2019ve heard of people rave about long term\ninvestments and all. We\u2019ve seen how every news and media promotes you to go for\nthe long term plans in the equity market. But what exactly is the long\ninvestment? And how long should be your long term equity investment? These\nquestions are quite pertinent and something which has been asked around for\nlong. Is there a definitive answer to these questions? Let\u2019s find out. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What\nis Long Term Investment?<\/strong><\/h2>\n\n\n\n<p>Generally, long term investment means an investment that is held for an extended period of time. But that\u2019s a mere vague term. What does long term holding mean? Thre are different perspective regarding this and a lot of has been made of the complexities brought up by it. If you were to look at the taxation perspective mandated by the Income Tax Act, 1961 then long term investment differs from one asset to others. For say, listed shares held for over 12 months will constitute a long term investment while unlisted shares need to be held for 24 months to be counted as long term investment. similarly land needs to be held for 24 months while debt-oriented funds need to be held for over 36 months. Here\u2019s a snippet of this one down below. <\/p>\n\n\n\n<p><strong>Long term investments if held for more than 12 months <\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>For securities listed in the recognized stock exchange<\/li><li>Zero-Coupon bonds<\/li><li>Unit of equity-oriented fund\/ UTI <\/li><\/ul>\n\n\n\n<p><strong>Long term investment if held for more than 24 months<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Unlisted shares<\/li><li>Land or building or both<\/li><\/ul>\n\n\n\n<p><strong>Long term investment if held for more than 36 months<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Unit of debt-oriented fund<\/li><li>Unlisted securities other than shares<\/li><li>Other capital assets <\/li><\/ul>\n\n\n\n<p>Based on the aforementioned mandate it means that long term equity investment refers to stock held for over 12 months. But that\u2019s for the taxation part. Looking at the same via an investment strategy, what would mean long term investment and how long should it be, seem to fetch a different scene. We\u2019ll follow with that down below. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>How &#8216;Long&#8217; should be your Long-term Equity Investment?<\/strong><\/h2>\n\n\n\n<p>There are different\naspects as to how we can interpret the long term investment. We can deem long\nterm investment based on the financial goals and also based on the market\nreturns. We here take a different route with a different perspective towards\nlong term equity investment. Read along.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>The Viewpoint from Financial Goals <\/strong><\/h3>\n\n\n\n<p>Let\u2019s first start with the logic behind the long term investment. The major reason behind the investment is to let your wealth grow over the long term. And why do we need to grow our wealth? Is it down to the financial goals of ours? Each one of us has financial goals and we intend to fulfil them. It may be anything like buying a dream car or a dream home or even looking forward to retirement. You\u2019ll need a substantially good amount of money for your financial goals to be fulfilled. <\/p>\n\n\n\n<p>For say you need around Rs 10 lakhs for your dream car and you\u2019re willing to invest around Rs 10000 per month for the same. Taking the compounding rate of 15%, at the end of 5 years, your corpus will be around 9.5 lakhs. Similarly, if you opt to invest Rs 15000 a month, then taking into consideration the interest rate of 15%, you\u2019ll have Rs 10.59 lakhs at the end of 4 years. If you compare this to your financial goals on buying your dream car, your long term investment will be 4 years or 5 years. If you look through this perspective it&#8217;s up to your investment goals and investment plan which will decide how long you should hold your investment for. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>The Viewpoint from the Market Returns <\/strong><\/h3>\n\n\n\n<p>The equity\nmarket tends to be dynamic in nature and is something that fluctuates with\ntime. This is what often puts people away from investing in the equity market\nas they are fearful of the equity market. But over the years, looking back, the\nequity market has given great returns. The thing about the equity market is\nthat you\u2019ll need to have patience and look or overall growth spread over a\nperiod of time rather than opting for the short term gains. We\u2019ve all heard of\nshort term trading like intraday trading, the weekly trades that help to\nrealize quick profits, but you should be clear on your motive as long term\nequity investment is more about seeking wealth growth over a period of time\nbiding patiently.&nbsp; <\/p>\n\n\n\n<p>We here look\nat the aspect of returns in the equity market over the years and seek what fits\nthe bill of the optimum period for long term investment. Looking back over the\nCompound Annual Growth Rate (CAGR), the returns for 3 years stand as 8.56% for\nthe large-cap funds and the 5-year CAGR for the same is 8.32%. Similarly the 10-year\nstats for equity market are 8.87%. And if you are looking at the 15 years\nstats, the CAGR comes across as 14%-15% for the equity market. &nbsp;<\/p>\n\n\n\n<p>Looking back\nat the aspect of long term investment based on market returns then the longer\nyou opt for the investment greater are the chances for generating high returns.\nIt\u2019s often said that the equity market delivers in the long run and the value\nsubstantially increases over time. Rather than seeking net returns, it is\nadvised to go for the average returns as that will depict a clearer picture of\nyour investment. It is advised to hold your investment for over 5 to 10 years\nfor the long term equity investment. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Final Note<\/strong>:<\/h2>\n\n\n\n<p>The long term investment\nis something of a persistent thing and it doesn\u2019t have an entirely clear answer\nto it. The periodicity for investment to be counted as long term differs from\none aspect to another. Income Tax Act implies a stock investment of over 1 year\nas long term investment. But looking from the viewpoint of investing in\nachieving financial goals, the time period is much larger. Also if you seek the\nhistorical returns and base your investment on that, you\u2019ll have a different\nnumber with you. The best advice is to go for anywhere between 5 to 10 years\nand the longer it goes, the higher the chances of your wealth growing\nmultifold. <\/p>\n\n\n\n<p><strong>Note: All information &amp; data provided in\nthis article is for the educational purpose as well as to give general information\non the investment and wealth management, not to provide any professional advice\nor service. Views &amp; opinions are not biased against the company and do not\naffect any official policy or any other agency, an organization within the\ncontent.<\/strong><\/p>\n<div class='epvc-post-count'><span class='epvc-eye'><\/span>  <span class=\"epvc-count\"> 3,092<\/span><\/div><div class=\"pld-like-dislike-wrap pld-template-1\">\n    <div class=\"pld-like-wrap  pld-common-wrap\">\n    <a href=\"javascript:void(0);\" class=\"pld-like-trigger pld-like-dislike-trigger \" title=\"\" data-post-id=\"173\" data-trigger-type=\"like\" data-restriction=\"ip\" data-ip-check=\"0\" data-user-check=\"1\">\n                        <i class=\"fas fa-thumbs-up\"><\/i>\n                    <\/a>\n    <span class=\"pld-like-count-wrap pld-count-wrap\">1    <\/span>\n<\/div><\/div>\n\n","protected":false},"excerpt":{"rendered":"<p>The equity market has gone through numerous cycles over the years. From being deemed as a myth to being one of the quintessential investment options [&hellip;] <span class=\"read-more-link\"><a class=\"read-more\" href=\"https:\/\/www.invest19.com\/blog\/how-long-should-be-your-long-term-equity-investment\/\">Read More<\/a><\/span><\/p>\n","protected":false},"author":1,"featured_media":174,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[28],"class_list":["post-173","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investment","tag-long-term-investment"],"_links":{"self":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/173","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/comments?post=173"}],"version-history":[{"count":1,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/173\/revisions"}],"predecessor-version":[{"id":175,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/173\/revisions\/175"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/media\/174"}],"wp:attachment":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/media?parent=173"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/categories?post=173"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/tags?post=173"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}