Significance of Long Term Investing

                    We always ask our investors to stay invested for longer term if they choose Equity as an Investment option. In today's blog, lets look at the Importance of Staying long and the risks of trying to make quick returns. Before moving on, Let us introduce you to an concept called the "Rolling Returns"

                Rolling Returns is the average return that an Investor would make in standard time Intervals (like 6 months, 1 years, 3 years. ) from Point A to Point B. Rolling returns take several such blocks of 3, 5 or 10-year periods at various intervals and see how the fund has performed over that period which makes this return more indicative of the actual performance of the fund. Due to different periods, the return consistency of the fund over the period can be analyzed as it considers both upside and downside market trends.

Now lets begin with the 1st set of data, Here we see the probability of an investor loosing money for different tenure of SIPs in Large & Midcap Category. 

So if your SIP is for a tenure of 3 years, there is 15% chance that you will end up loosing. Consequently if your SIP is for 5 Year then there is only 2% chance of incurring a loss and finally, if you do choose to do a SIP for 7 Years, there is no chance you will loose your principal. 

But but, We need to know how much we will loose in those 15% time right? Here's a table with data..  

    
So in a 3 Year SIP, you can loose as much as 9% while in a 5 year SIP, the loss narrows down to 4% and as the tenure increases to 7 years, there is no loss but a small profit of 5%. Mind you, this is worst return that you will ever make on your SIP and not the highest return. 

So let me move your attention to a one year SIP. Here's how its looks 

A lot of readers ask us if there is an "Opportunity" to make money in one year. For them, the message is if you are ready to take a loss of 30% on your capital 30% of the times, then go ahead and gamble! But if you ask us its not advisable.

Here's the deal, as you can see from the data, If you choose Equity as an investment, always choose a higher tenure as it 
  • Reduces the risk of loss 
  • Increases the probability of positive returns. 


For financial planning and investment-related queries, write to us at dropletadvisory@gmail.com or call us at 9962399924 / 9551373455. Visit our website - www.dropletwealth.com    



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