Equities have given 16% returns over 20 years, what's ideal holding period?

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Historical data suggests that a long-term investment horizon of at least five to seven years can help investors ride out market fluctuations and benefit from the power of compounding. However, individual circumstances may warrant a longer or shorter investment timeframe. A study by FundsIndia shows that Indian Equities have outperformed all other asset classes over the long run and have given 16 per cent returns over 20 years. 

The report from FundsIndia — Wealth Conversations August 2024 — has an interesting insight: if you had invested in a basket of NIFTY 50 stocks on any day since June 30, 1999, and remained invested for a minimum of 7 years, it would have delivered more than 10% returns 83% of the time, as reflected by the NIFTY 50 TRI.

By analyzing the Nifty 50 index over the past 23 years, the study reveals a strong correlation between investment horizon and returns.

Key Findings:

Consistent Returns: In 98% of seven-year investment periods, returns exceeded 7%.

Higher Returns with Longer Horizons: Investment periods of 15 years or more have consistently delivered returns exceeding 7%.

Market Volatility: While the market experiences fluctuations, long-term investors are better positioned to weather these storms.

Historically, Indian equities have outperformed inflation by six to eight per cent.