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Benefits Of Equity

Equity is the best asset class to create wealth over the long-term through systematic investing…

I am 38 and am investing Rs 25,000 a year for my 2 year old son so that I can create a corpus of Rs 70 lakh for him when he turns 18. I am currently investing through SIPs in DSPBR Top 100 Equity, HDFC Top 200, BSL Frontline Equity and Reliance Growth. I have also invested in PPF and currently he shares invested in his name are worth Rs 3.5 lakh. Please suggest if this approach is right?
- Amit Doshi

Schemes  Category  Rating  3-yrs ret (%)  5-yrs ret (%)
BSL Frontline Equity Large & Mid Cap **** 10.65 17.54
DSPBR Top 100 Equity Large Cap ***** 9.54 16.78
HDFC Top 200 Large & Mid Cap ***** 14.34 18.03
Reliance Growth Mid & Small Cap **** 7.89 14.25
Returns as on May 30, 2011 Ratings as on April 30, 2011

Equity is the asset class that works best for long-term investing. A portfolio earning an annualised 12 per cent over 16 years will achieve your goal of accumulating Rs 70 lakh with Rs 12,200 monthly investments. If the portfolio earns 15 per cent, you need to invest Rs 8,800 to achieve your goal in the same period. This is the combined effect of power of compounding and systematic investing. Your current fund selection is good and forms a diversified portfolio which should help you achieve your goal.

The PPF investment is assured and guaranteed, it does not beat inflation in the long run, which you can reconsider continuing with or just maintain the account. You can continue investing in stocks if you have the time to track them and the ability to take risks associated with them. Your approach to invest in equities and equity-oriented mutual funds is the right way to long-term wealth creation.



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