By Sourav Chakraborty

Equity is the residual claim of the investors in assets after all liabilities are paid.

Equity market generally refers the stock market. Equity investment generally done by the investors in anticipation of capital gains and dividends. Investors invests in short term or long term basis. Long term investments generally refers the investments hold over one year.

 AVOID MARKET VOLATILITY

One of the main concerns for any type of investing is market volatility. volatility measures the degree to which price changes over time. The advantage of long-term investing is found in the relationship between volatility and time. Investments held for longer periods tend to exhibit lower volatility than those held for shorter periods. A security can be highly volatile on a daily basis but show long-term patterns of growth or stability.

 HISTORICAL PAY OFF

Staying invested in the market over the long term has historically paid off. It is very difficult and risky to time the market. However, staying invested in the market over the long term has historically paid off. Although short-term fluctuations seem random, the stock market tends to reflect the overall growth and productivity of the economy in the long run.

IF WE CONSIDER SENSEX THEN WE CAN SEE THAT IT STARTS WITH A BASE INDEX OF 100 IN 1978. IN 2012 IT IS OVER 16000. SO IF WE CONSIDER IT IN COMPOUND INTEREST RATE THEN WE CAN SAY BY THE FORMULA FV=P(1+R/100)n
or, 16000= 100(1+r)34
or, FVIF
r%34 = 160

or, r = 16.19%(approx) SO THE GROWTH RATE IS OVER 16%

25000 20,325.27 20000 13,827.77 Open 9,422.49 10000 6,626.49 5,872.48 5000 3,990.65 3,383.85 3,262.01 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 0 1 2 3 4 5 6 7 8 9 10 11 12 9,720.55 Year 20,621.61 17,473.45 15,534.67 15000

If we follow the trend we can easily say that it provides upward trends over the year. So long term investors get more benefit.

 TAX BENEFIT
Most cases long term gains ( held over 12 months) your money are taxed at rate below your income tax bracket. Short-term gains, on the other hand, are taxed as regular income .

 OTHER BENEFITS Long-term investing saves you other expenses,

like Transaction cost, Broker charges etc.

Certain mutual funds may defer sales charges if

you hold your shares for a long period.

Long term investment is also useful for saving for

retirement or a college education, for a future house, or to provide funds for the long-term care of your parents.

Before long term investment you'll need to choose some portfolios and strategies based on your risk tolerance and desired returns and also must keep in mind that along with its benefits come the drawbacks of limited liquidity.