Hold your equity investment for 1 day and your chances of negative returns are 46%. Wait for a month and those odds marginally reduce to 39%.
The equation flips big time if you wait 3 years then your chances of negative returns drop to only 7%. So returns are positive 93% of the time.
Those who waited 7 years or more never got negative returns.
When investors (who started investing a month ago) see their corpus value dropping, they often ask us:
“What’s going on?! Why is the market dropping?! Was this the wrong time to get in?!”
Our answer is “We don’t know!”
The market fluctuates as information globally changes. Two factors determine the dynamic value of equity:
1. Traders buy and sell based on their guesstimates of the near future. War, inflation, government policy changes, tech advancements, and interest rates contribute to instability. Market sentiments make the journey a roller coaster ride.
2. The companies on the stock exchange deliver growth to investors based on their earnings.
Over time, the weekly speculative volatility is overwhelmed by the gradual but consistent upward march of equity.
