What's the right holding period for equities? Find out here

When it comes to holding period for equities, there’s no dearth for advice. While most financial planners and advisers simply use the word “long term” the question still remains, what’s long term really.

According to a article published in Business Line on 20 July, if you want to avoid losses in equity you need to hold on to your investments for 10 years. This inference was drawn when they did a rolling returns analysis for Indian equities for last 35 years. They found out the following few things.

To avoid losses in equity investments hold on for a minimum ten years.

The report says, “A rolling return analysis of the Sensex shows that there were quite a few phases in Indian markets where equities delivered a negative return to investors after a five-year wait.” But instead, if you hold stocks for minimum 10 years, it almost guarantees you positive returns.

Moreover, if you wait for 10 years, you improve your chances to get a mouthwatering inflation beating CAGR of 15% from your stock holdings.

The analysis also showed that small caps and mid caps take a much longer time then large caps stocks to give returns worth writing home about. Likewise, the ten year itch works even for actively managed mutual funds.

In short, ten is the number that works for you when it comes to equity investments. Read the full story here .