24 March 2011

Equity is still one of the best investment tools

Over the long term, the fact shows that the return is higher as compared to bonds or money equivalents due to its risky or volatile character. As we seen the impact by recent financial crisis, middle east turmoil as well as Japan's earthquake & tsunami tragedies to the stock markets, a lot of fear emotion in the market and people started to panic to sell off their investment holdings and look for safer returns.

Nevertheless, a lot of opportunities arise whenever there is a risk involved. As what Benjamin Graham mentioned, the intelligent investors are those who beat the market by being 'smarter' than other investors by doing a lot of detailed homework and thus enjoyed better returns than the rest.

Statistic shows that over the longer period such as 10 years and above, Equity performed pretty
well above bonds and cash equivalents. However, we should take considerations of how many percentage of equity we can allocate in our portfolio for the needs of different purposes such as retire planning, child education planning, short term emergency planning etc. This can avoid us to be overconfidence of what returns can equity gives to us as the returns always accompanied with the risk.

In next blog I will show you how to create a portfolio suitable to your short term and long term needs. But before that make sure you have basic financial knowledge.

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