Duration of Long-Term Investments in Stocks Explored
Long-Term Investment in NIFTY 50: A 10-Year Horizon for Maximum Growth
A long-term investment in equities within the NIFTY 50 index is generally recommended to be 10 years or more, based on historical data. This recommendation is backed by consistent annualized returns (CAGR) of around 11.2% to 11.24% over the past decade or more [1][3].
Studies show that negative returns are rare when holding NIFTY 50 for 10 years or longer, making this duration a practical benchmark for long-term equity investing in India [2]. Financial products linked to NIFTY 50, such as index funds, often suggest a minimum investment horizon of 3 years, but true long-term wealth creation is more aligned with a 10+ year horizon [5].
The table provided shows the rolling returns range for the NIFTY 50 over different time horizons, including a seven-year time horizon, where the probability of earning 10%+ returns was more than 80% [4]. Interestingly, investors never lost money whenever they invested for a seven-year time horizon.
The long term, according to the analysis of NIFTY 50's data for the last 24 years, is defined as any time horizon above seven years [6]. For time horizons longer than one year, the probability of earning 10%+ returns increases.
Investors can track all their investments in one place on a specific platform and invest in any Indian mutual fund without paying any commission [7]. It is important to note that while a minimum of 3-5 years might be recommended for equity exposure, the consensus from historical performance and expert analysis is that at least 10 years is ideal to classify an investment in NIFTY 50 equities as long-term, capturing compounding growth and reducing volatility risk [1][2][5].
However, it's essential to remember that the study is based on historical returns, and the reality may differ. It is always advisable for investors to diversify their portfolio and consult with a financial advisor before making any investment decisions.
[1] Source: BankBazaar.com [2] Source: Economic Times [3] Source: Moneycontrol.com [4] Source: Provided table [5] Source: Zerodha [6] Source: Investopedia [7] Source: Specific platform's website or app
- To build long-term wealth in India, it could be beneficial to consider investment options such as hybrid funds or equity funds, as their growth is often linked to the NIFTY 50 index, which historically has shown consistent annualized returns over a 10-year horizon.
- While choosing personal-finance products for long-term investing, it is crucial to keep a 10+ year investment horizon in mind, as this period has shown the highest probability of earning 10%+ returns with reduced volatility risk, as indicated by the analysis of NIFTY 50's data.
