Is long term equity investing only a myth?

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Is long term equity investing only a myth?
"In the long run we are all dead" is a well known phrase. While many top investors across the globe, talk of creating value and generating wealth by investing long term, it can most of the times be merely a myth.

As investors, if you are not in the right stocks, you can hardly create wealth and generate value. In fact, you are likely to erode your networth.

Take a look at some of the Nifty stocks in the last five years. Most of them have failed to even match bank rate of returns. In fact, some have given negative returns, ensuring that your principal amount is eroded.

Let's take a few example of Nifty stocks. Exactly, five years ago the share price of Tata Steel was quoting at Rs 430. It is trading at Rs 275 currently - a substantial dip. If you think these are far and few between, you are wrong. Nifty stocks like Jaiprakash Associates, Bharat Heavy, Tata Steel, Hindalco, Sesa Sterlite, IDFC, Power Grid, Jindal Steel, Bharti Airtel etc., are classic examples where your returns from these stocks are negative or they have given returns less then bank rate of returns.

Remember, the above mentioned are just a few.

However, there are stocks like Asian Paints, ITC, Hindustan Unilever, Dr Reddy's Cipla, HDFC Bank and select other stocks where long term investing would have paid off.

While, it's easy to advocate that one should have invested in the above mentioned stocks for returns, it's not an easy task to select a winner. Buying some of these above mentioned stocks at the current levels is extremely expensive and there is no guarantee that five years down the line these stocks would generate returns as they have done in the last five years.

Investing today keeping in mind a long term perspective is only a myth. It's also because the regulatory environment keeps changing so fast that the prospects of companies might dwindle even faster.

If you like a particular telecom stock and buy it for long term, suddenly you realise that the telecom regulator with a new regulation has played havoc with industry.

You like a particular steel stock and buy for long term, only to realise that a coal and iron ore mining ban could affect the company. Similarly, if you a good pharma stocks, you might read news that there is an FDA ban on a facility of the company.

Ditto for regulatory hurdles in banking, real estate, infrastructure etc

Clearly, long term investing is only a myth - after all, we are all dead in the long term.

Story first published: Thursday, October 3, 2013, 8:56 [IST]
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