Equity is ownership of a business and the risk that it brings, either directly (through stocks) or indirectly (through mutual funds)
Involves buying shares of publicly listed companies
Shares are traded on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE)
Misunderstood to be gamble - It is a slow cook
Volatility and its effects
A large cap index will be more stable than a mid cap index
Volatility affects those who deal in the stock market for short periods of time
The longer you allow an index to work, the lower the effect of volatility
Stocks are the best way to beat inflation
As inflation rises in the system – the input costs for the firms go up – they are passed on to the consumers in the form of higher final prices. The ‘margins’ or the profits of the firm, therefore, get protection from the effect of input price inflation.
Time in the market matters. It smoothens out the volatility of the market
Do NOT put your money into the equity market if you need it next year
Requires patience - Good equity portfolio needs five years of patience, ten years to see consistent returns, but actually will slow-cook over fifteen to twenty years