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Longterm Investments in Stocks
05 Jan 2023

A strategy that entails holding investments for a greater period than a year is a long-term investment strategy. Such a  strategy includes the holding of  assets like stocks, bonds, mutual funds, exchange-traded funds (ETFs), and more. Individuals take a long-term approach and require patience and discipline. That's the reason that investors must be capable of taking on a degree of risk while waiting for greater rewards down the line.

Market experts suggest holding stocks for the long haul. From 1975 to 2021, the S&P 500 experienced losses in just 10 of 47 years, thus making returns from the stock market volatile in brief time frames. Nonetheless, historically,  investors have experienced a higher success rate over longer terms. In an  environment riddled with low interest rates, investors may fall prey to the temptation of dabbling in stocks for boosting short-term gains, but it makes logical sense—and pays higher overall profits—to retain stocks for long-term investment rewards.

Historical Long-Term Returns in Stocks

An asset class represents a particular category of investments. These investments resemble each other’s characteristics, like equities or  fixed-income assets (bonds). Equities are commonly referred to as stocks. The asset class that's fit for you depends on numerous factors, including your risk profile, age and tolerance, the amount of capital you have, and your investment objectives. But which asset classes are meant for long-term investment? Looking at many decades of returns in asset classes, we discover that stocks have relatively outperformed nearly all other major asset classes. For instance, the S&P 500 gained an average of 10.22% yearly between 1928 and 2021. Furthermore, in India, finance history tells us stocks outperform other asset classes by a wide margin in the long run. In India, the Sensex, just 100 in 1979, and approximately 48,000 by May 2021) has returned an impressive 15% CAGR in the last 42 years or so. Furthermore, systematic investment has made investors rich in India. On the other hand, traders may have seen losses. The majority of traders in stocks lose money, according to historical data. These are those individuals who don’t hang on to their shares, but are engaged in trading online for the short run. 

Equity in Emerging Markets

Stocks are good long-term investments as, depending on the stocks you select, you will witness fruitful returns by holding on to them for more than a year, or even a few years. The wait may seem long initially, but when you see returns, they will just flow in. Some of the highest returns potential arises out of emerging markets. However, this may carry with it, a degree of some risk. Such a class of stocks has historically earned, on average, 12%-13% returns annually. It should also be noted that fluctuations that occur for the short-term affect long-term investment performance. You may also see some small-cap and large-cap stocks delivering higher-than-average returns. 

Get Into Stocks with MO

When you are interested in stocks and are willing to ride out highs and lows and hold onto stocks till they reach their pinnacle of returns, you will gain from stocks in the long term. They are considered long-term investment options for the simple reason that, over the short-term, it's not uncommon to see their value drop by 10%-20%. You should hang on, and some investors do so for decades, making a stockpile of cash ultimately. At MO or Motilal Oswal, experts can pick the right stocks for long-term investment goals and aid you in your financial path. 

Related Aritcles:

How to Analyse Mutual Funds for Big Returns | Things to Know Before Investing in Mutual Funds | Mutual Fund - Need of Financial Plan | How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account 

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