Why is Equity Exposure important for Wealth Creation?

#1
Equities interpreted by the masses as the riskiest financial instrument has its own intangible risk. Despite this, if we look at the historic data, the equity market managed to generate high-returns than any other financial instrument available in the market. Many people still do not prefer to invest their capital in this instrument and think of it as a risky investment, fearing market volatility.
One thing we can all agree on is, ‘Diversification is the key to wealth creation’, and one cannot image expect a diversified portfolio without any equity instrument. Equity exposure is really important for wealth creation. In a portfolio, a debt instrument helps in balancing the risk and sudden decline in price while the equity instrument enhances the overall return of the investment portfolio. But, if one approaches it right, one can minimize the risk and volatility and diversify the portfolio across multiple securities with a long term horizon to achieve future financial goals.
With the power of compounding and the right approach, the equities can provide remarkable returns. Even several studies have shown that equities invested for longer periods (10-15 years or more) can result in high inflation-adjusted returns. The risk over a long period of time is not as high as some people perceived.
As you know the stock market largely depends upon the country’s economic growth. India is one of the fast-growing economies in the world, the shares trading on domestic exchanges have given higher returns than the bank’s fixed deposit rates.
With this in mind, we can say that equities are the best bet when it comes to wealth building and having capital invested in an equity-diversified portfolio can generate income that can help in future financial goals and becoming financially independent.
Many beginner investors still lose money in investing in the stock market; it is because they invest their money based on the information received from family members or friends. As a result, they lured towards short-term profits and end up losing more. Such investors should seek for professional stock advisors and expert investment & wealth building platform to avoid unnecessary risks.
 

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