Why do we need to invest in equities?
Basis historical data, Equity has demonstrated the potential to outperform the return of some other asset classes like Gold, Debt, Real Estate, etc. It is more likely to help an individual to achieve their financial goals and beat inflation and taxes in a longer period. If a person invests entirely in conservative investment avenues like deposits, it may be difficult to protect your wealth from inflation and taxes.
Let's understand this with an example:
Assuming a fixed deposit offering you a return of 8% and the tax rate is 30 %, then your post-tax return in your hand is 8*(1-0.3)= 5.6%. If we assume equity post-tax return as 10% p.a., then after 20 years, the value of the Rs. 1 lacs in FD investment would be Rs. 2.97 lacs, while equity investment value would be Rs. 6.73 lacs, which is more than double of FD Investment.
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