The current volatility in the stock market may nudge investors to pull out their investments. But past trends show that long-term equity play has not disappointed investors. So it may not be a bad idea to put up a brave front and hold on for a little longer, feel fund managers.

Equity market investors would be more than happy to put behind memories of 2011, which saw many of them booking big losses as major indices lost more than 20% of their value during the year.

Also, sharing this sympathy is the group of investors who chose to invest in the equity market through mutual funds, albeit for a shorter time frame. Prominent equity schemes have lost between 12% and 25% of their net asset value during the year, making many of the existing investors ponder over the futility of mutual fund investing.

However, for those deliberating exiting mutual fund investments, citing last year's failed performance, a hindsight overview of the performance of equity schemes over a longer tenure, is likely to compel them to put their redemption plans on hold.

An analysis of all equity schemes (growth option) that have been in existence for at least 10 years reveals that average returns by these schemes over a 10-year haul has been more than 700%, which is nearly double the return generated by the Nifty during this period. Schemes such as Reliance Growth & Vision, HDFC Top 200, HDFC Equity & HDFC Taxsaver, Franklin India Prima and DSP Blackrock Opportunities are a few of those to have returned more than 1000% in absolute gains to investors during this period. In monetary terms, this translates into a return of more than 1,00,000 today for every 10,000 invested in any of these schemes in 2001.

This 10-year investment tenure includes market rally that began in 2004-05 until the end of January 2008, taking the Sensex from levels of 5000 to 21000, the severe meltdown in 2008 and the dramatic recovery in 2009, not to forget the downturn seen in the current calendar year. Despite these odds, those with strong conviction to stay put with their investments, have undoubtedly been rewarded generously.

The kind of returns generated by these equity mutual fund schemes are far more superior to those generated by traditional savings instruments such as the Public Provident Fund or tax-free bonds issued from time to time and carrying an investment tenure of 10 to 15 years.

While there is no denying that traditional savings instruments carry limited risk and offer guaranteed returns; equity schemes, though high on risk, have also known to handsomely reward risk takers. It is, however, up to the investors to cap that risk that they would like to partake while investing in equities.

 
To illustrate, schemes like Franklin India Bluechip is famed as a follower of traditional investment philosophy to simply invest and hold stocks of popular large-cap, blue-chip companies, without taking undue market risks. This scheme has returned about 940% absolute gains over the past 10 years. While these returns may not appear as ambitious as 1850% absolute gains clocked by Reliance Growth since December 2001 till date, they are nevertheless more than sufficient to take care of the appetite of conservative investors from the equity market, provided these investors are ready to stay invested for a longer time frame.

Long term investing is the key to make money in the equity market and this fact has been reiterated not only by investment advisors and fund managers but also the noted investment guru Warren Buffet who has said,
"I never attempt to make money on the stock market. I buy on the assumption that they would close the market the next day and not re-open it for five years."