Shaina should know that the returns from investments are futuristic and hence, can only be estimated. There are no guarantees in the investment world, especially in equities. Her focus should be on the procedures to be followed for choosing equity funds, the time point at which she invests and the period for which she invests. She will protect her investment from high risk by using a good process and earn market return on her investment.

Now the question arises that how can she estimate the returns? The easiest thing to do would be to look at the historical returns and make some expectations based on that. When it comes to equities, returns can be very volatile. However, what Shaina will notice is that if she diversifies her investments so that she has a slew of equity shares; Invests consistently without investing a lot of money at the same time; And given that it stays invested for longer periods across market cycles, its return is likely to be closer to the longer term average. She is following this process in her investments using SIP.

long term return from equity investment Tries to beat inflation figures. The ability of equities to earn higher returns enables businesses to use the funds they borrow, invest them in assets, and earn higher returns. This business risk is offset by the risk premium on the equity investment. Shaina will find that the average long-term returns from investing in India systematically have been around 14-16%. If inflation comes down in the future, it will come down. It will also be subject to severe short-term volatility. Therefore, he should not expect to earn a steady return every year, but should expect fluctuations, which average out over time. Since his investment process is designed to minimize his risks, he should perform well given his long-term orientation.

Content on this page is courtesy of Center for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.