Why Equity is not Risky?

Most of them are scared of the word Equity and the rich to rags stories floating around the market about it.

This happens most of the time when you don’t understand the real concept of it. One must only need to understand What is Equity and When Equity then I believe there is no risk attached to it. I will explain how!

We all know from the time we get up in the morning till we sleep, directly or indirectly we use at least 500 products in a day. For instance starting from Colgate to our breakfast table with Britannia, Flooring, and bathroom fixture company like CERA or Shoe company like BATA, Gadgets in our hand of Google, Reliance, Apple to MRF Tyres when we move out for work. The list is very long and it goes on and on.

We can hardly name any company that is or was a loss-making company for a long time? I can’t even think of one company which would be loss-making for a long time and then out of the market. Let’s look at the richest people around the world, most of them are businessmen or businesswomen. Do you think they are rich because they have got a lot of real estates, FD’s or gold? To be honest NO! They are Equity owners. Having patience with the equities held by them made them rich. Business needs a certain time to grow and flourish so does equity.

If you are a frequent WhatsApp user, you might have recently come across a viral message in circulation where someone was talking about Wipro share owners are worth 550 crores in today’s date if they had purchased 1 lakh worth shares in the year 1980. But how many of them had a hold on to it? I don’t think apart from Aziz Premji and few of his friends and family must have hold on to it.  Equity holders only make money with patience. I know so many of them who have fixed deposits in SBI, ICICI, HDFC or any local banks just because they feel these banks are safer and there is no risk attached to it if their hard earned money is kept here. If these banks are really safe then why not equities of these banks why FD’s??

See this ILLUSTRATION. It will explain you what I am trying to convey:


Bank Names HDFC SBI ICICI Axis
FD’s held since 2002 (Amount invested 1Lac) 3,79,579 3,74,403 3,76,283 3,84,821
Equities held since  2002(Amount invested 1Lac) 39,22,000 17,09,091 19,88,000 89,41,000

If you see the above table, it shows what would be your invested amount’s worth if you would have bought the equities of the same bank instead of FD’s. The potential of growth what a business/equity class has cannot be compared with any other asset class.

Oh and yes! People who curse equities they are actually traders who wish to double their money overnight, they are not investors. So I always recommend, if you are investing from a long term perspective or want to create some serious wealth then, Equities is THE asset class with time horizon being above 10 years.

For everything else, Money Anna is always around!