Equities are the most popular class of assets among both – investors as well as traders. The major reason for their popularity is the fact that they’re the perfect hedge against inflation.

Since equities stand out against other asset classes in outpacing inflation over the long term, investing in equities is similar to investing in a business. And since strong businesses have the ability to pass on inflation and thus increase their product prices to negate its impact, equities have the potential to absorb inflation over the long term.

The other reason why Equities enjoy the patronage of thousands of investors is the fact that it makes for long-term wealth creation. So if a strong business, which is growing and has good return ratios is bought at an early stage of growth and at cheap valuations, the long-term wealth creation can be phenomenal. For example, investors who invested in the Infosys IPO in 1993 would have multiplied their wealth by over 3000 times over the past 20 years.

Some of the other benefits of Equities are:

• Liquidity: Equity is a liquid asset class and can be converted into cash easily. Investors can buy or sell stocks instantly as they are listed on the NSE and BSE.
• Diversification: Investors who want to gain higher returns on their investment should opt for equities because it constitutes diversification from other asset classes. It also helps balance return and risk by allowing you to invest across a range of sectors, stocks and markets.

Not investing in equity could be risky

The Indian economy and its constituent businesses today present an opportunity that comes once in a lifetime. Not participating in the stock markets during the growth phase can be considered as an opportunity missed. Growth brings inflation, which drives up the cost of living and eats away at the value of savings. You need to stay invested in high-growth classes to beat inflationary pressures.

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