Here's why equities are suitable for long-term investors

In an interview to CNBC-TV18, personal finance expert, Gaurav Mashruwala, Certified Financial Planner shared views on how one should allocate funds in equities and why equities are apt for those who have long-term investment horizon.

Find out: When is right time to begin investing Below is the verbatim transcript of Mashruwala's interview with CNBC-TV18. Q: Financial advisors always say that people should invest for more than ten years to get good returns. But for someone, who invested in 2008 when the Sensex was at 21,000 are still waiting for the index to reclaim that level. How can their investments be justified? A: Generally if you pick up a decade in any equity market whether Sensex data or Dow Jones or FTSE; in a decade there will be one or one-and-a-half complete business cycle. I agree that if somebody invested lump sum in January 2008, when Sensex had crossed 21,000, even today the person has not reached that and to that extent there is depreciation in the asset. Having said that if somebody wants to do an SIP and wants to invest in Sensex and index fund, from that month to May and if somebody wants to do it in a systematical manner month on month then depending on which date and how he has been doing, the returns are anywhere annualised between 5.5 to 12.5. In most of the cases if we do a standard deviation, most of them fall between 7 percent to 9 percent annualised returns, which means if somebody wants to do a systematic investment plan (SIP) in Sensex from 2008 till May this year, the person has got somewhere between 7 percent to 9 percent annualised return. So, even when Sensex has not reached, the person is making money that is why financial planners keep on saying to locate equity from long-term perspective and keep on doing it on regular basis. Q: What would you recommend in terms of a possible hedge in order to safeguard portfolio within the ten years? A: We would normally encourage clients to invest keeping in mind their financial goals and hence the issue of hedging becomes little irrelevant because for financial goals, which were likely to occur in next two-three years, choose debt as an asset class because the principal will remain protected. If one is looking at something which is seven to nine years and beyond then look at equity for interim period, make a combination. Over and above that we would always recommend contingency and health insurance, life insurance. So, planner looks at completely from different perspective; planner looks at from the perspective of the situation and how to protect that from turbulences time and other calamities that comes in instead of looking purely at an external condition. So, getting into hedging derivatives all those things doesn't play that much important role as long as one links it to financial goals and situation.     _PAGEBREAK_ Caller Q: I am 27 years old and will be getting married soon. My parents will be giving me quite a bit of jewellery etc. How can I ensure that my stridhan remains with me? What precautions should I take? A: There is no laid down procedure in law. However, you can make a list of whatever her stridhan is, at the most have two witnesses to it, take picture and keep it aside or whatever you have received keep in a separate locker. However, there isn't anything beyond that. So, if this was to get challenge or somebody was to take it away, the list that you would have made can act as evidence, but it is on a full proof thing. There isn't any full proof thing as in terms of document on a stamp paper, register it. There is nothing like that exist in law. Therefore, make a list, at the most have two witnesses, take photographs of jewellery and gifts.