Why should you invest in share market in 2023 and beyond?

It might be intimidating to invest in the stock market, particularly during uncertain economic times. However, there are strong arguments in favour of including stock investment in your long-term wealth generation plan. With proper research, risk management and a long-term outlook, equity investing offers the opportunity for portfolio growth that can beat inflation and build significant wealth.

In this article, you will look at key reasons why investing in the share market today and beyond can be a wise choice.

1. Strong Economic Fundamentals

One of a world's main economies with the quickest growth rates is India. In 2023 and the years that follow, GDP growth is anticipated to be about 7%. A large and growing middle class with higher disposable incomes is driving increased consumer demand across industries. India is also progressively moving up the ranks for both innovation and business accessibility worldwide.

By 2025, the government wants India to have a $5 trillion economy. Various policy reforms like GST implementation, push for manufacturing, infrastructure creation and digital adoption are helping strengthen economic fundamentals.

2. Potential for Earnings Growth

Over time, a company's share price is significantly influenced by its profits per share (EPS). A corporation may pay its shareholders greater dividends and capital gains when its earnings are higher.

Over the next five to ten years, many well-managed firms might see earnings increase at a CAGR of more than 15 to 20%. The positive effects of economic expansion, greater demand, industrial consolidation, and increased effectiveness make this feasible.

3. Expanding Investment Opportunities

The choice of promising companies to invest in continues to expand for Indian equity investors. The number of listed companies has grown from around 5,000 in 2014 to over 7,000 today.

Scores of unlisted unicorns are also queuing up to list on the stock exchanges in the coming years. Lots of new economy businesses focused on technology, digital commerce, finance and other sunrise sectors are getting added to the listed space.

4. Under-penetration of Equities

India has a relatively low penetration and allocation to equities as an asset class. Equities comprise less than 5% of household assets compared to over 15% in developed economies.

Low penetration indicates a huge scope for channelling long-term savings into equities by retail investors in the years ahead. As equity investing gets more mainstream, this can provide a stable base to the markets.

5. Long Term Wealth Creation

Equity investing requires patience and a long-term outlook spanning years or decades. Short-term volatility needs to be handled. However, historically, equities have delivered the highest inflation-adjusted return among major asset classes over long investment horizons.

As per historical data, Rs 10,000 invested in Sensex 30 years back in 1993 would have grown to around Rs 1.25 crore today, assuming dividends re-invested. That is a CAGR of more than 15%.

6. Tax Saving Options

Equity-linked savings schemes (ELSS) allow for tax deductions under Section 80C. One can invest up to Rs 1.5 lakh in ELSS as part of overall Section 80C limit of Rs 1.5 lakh. As per current tax laws, long-term capital gains (LTCG) from equities exceeding Rs 1 lakh are taxed at just 10%.

7. Systematic Investing Possible

Investors should avoid trying to time the market and instead use systematic investment plans (SIPs) for steady equity investing. A monthly or quarterly SIP of even a small amount builds up a sizeable corpus over 5-10 years.

Conclusion

Equity investing has historically delivered high inflation-beating returns over long investment horizons and helped create substantial wealth. Strong economic fundamentals and expanding opportunities make a case for higher equity allocations for long-term investors. If you want to know where to start, download the best share market app that facilitates convenient access to these potential benefits and get started.