How should a 39-year-old start his equity journey?

Vivek has so far invested only in fixed-income instruments. Now he wants to start investing in equities. Here's what he should do.

- Vivek

Vivek (39) has never invested in equity. So far, his investments have been limited to the traditional avenues, including the Public Provident Fund (PPF), post-office schemes, bank deposits and insurance policies.

However, he has often been fascinated by the stories of his friends earning handsome returns in the stock market. And more recently, one of his friends even prepaid his loan by booking profits on his equity investments in the recent rally.

All these incidents have inspired Vivek to start his journey in the world of equities. He wants us to guide him on this journey.

WHY SHOULD ONE INVEST IN EQUITY?

• Although bank deposits and post-office schemes offer guaranteed returns, they fail to provide reasonable returns after adjusting for inflation. Equity is the only asset class that has a reliable track record of beating inflation in the long term.
• Investing in equity or buying stocks means you invest in companies and participate in their growth journey.
• Although equities tend to be volatile in the short term, the risk can be reduced considerably if one stays invested for the long term.

Bank FD vs Sensex vs inflation

Barring a small period in 2020 when the market crashed due to COVID, the five-year returns of equity have mostly stayed well ahead of inflation

SHOULD VIVEK INVEST IN STOCKS DIRECTLY?