The Great Equity Myth: Why "Invest in Stocks" Isn't One-Size-Fits-All
- Abraham Cherian
- Jun 7
- 6 min read
And why how much you need to invest depends entirely on what you invest in
There's a piece of financial advice that gets repeated so often it has started to feel like gravity — just an immovable fact of life. It goes something like this: "You must invest in equity. Without stocks in your portfolio, you're leaving money on the table."
Financial advisors say it. Mutual fund advertisements imply it. Fintech apps are built around it. And for millions of Indians building their first SIPs, it's practically gospel.
But here's a question worth sitting with: Is it actually true for everyone?
The short answer is no. And understanding why it isn't true will also help you grasp a second, equally important idea — one that most people never quite connect: the safer your investment choice, the more money you need to put in upfront to reach the same goal.
These two ideas are linked. Let's walk through both.
Why Equity Gets Oversold
The financial services industry has a structural incentive to push equity. Higher returns make for better marketing. "12% per annum over 15 years" sounds far more exciting than "7% in a bond fund." Mutual fund distributors earn commissions. Advisors build careers on the wealth-creation story. None of this is sinister — but it does mean the advice you receive is not always neutral.
The narrative that emerged from this is a powerful one: equity = wealth creation = mandatory.
And for most people at most wealth levels, there's genuine truth in it. If you're a 30-year-old building a corpus from scratch, equity is probably your most efficient tool. The growth you need cannot come from fixed deposits alone — not without tying up enormous sums of money for decades.
But here's where the story quietly changes. Once someone has accumulated significant wealth — say, a retired professional or a senior executive with a sizeable corpus — the calculus is completely different. At that point, the question is no longer "how do I grow this?" It becomes "how do I make this last, generate income, and stay intact?"
For that person, equity risk may be unnecessary. In fact, it could actively work against them.
The Affluent Exception
Consider a retired couple with ₹5 crore in savings and annual expenses of ₹20 lakh. They need their money to last 30 years. If they invest at 7% in quality fixed income instruments — bonds, debt mutual funds, fixed deposits — and do the math properly, they can sustain their lifestyle without ever touching equity.
The numbers work. Not because equity is bad, but because they no longer need equity to solve their problem. Their corpus is large enough that slower growth is acceptable.
Now consider a second scenario: the same couple, but with only ₹1.5 crore saved. At 7%, the annual income falls significantly short of ₹20 lakh in spending. To close that gap, they need their corpus to grow faster. Suddenly, equity is not optional — it becomes necessary just to stay solvent over time.
Same goal. Same lifestyle. Radically different conclusions — purely based on how much capital they started with.
This is the point The Ken made recently, and it deserves to be said plainly: equity is often oversold as a universal necessity when, in reality, it is a tool — one that some people genuinely need, and others genuinely don't.
The Flip Side: How Much You Invest Depends on Where You Invest
Here's the second idea that most people never fully connect to the first.
When you choose a lower-risk product, you are choosing a lower return. That's not a bug — it's the deal. Safety costs something, and what it costs you is growth speed. The practical consequence of this is often glossed over:
The safer your investment, the more money you need to put in today to reach the same future goal.
Let's make this concrete.
Suppose your goal is to accumulate ₹1 crore in 15 years.
If you invest in equity with an expected return of 12% per annum, you need to invest roughly ₹17,000 per month via SIP.
If you invest in a debt fund or bond at 7% per annum, you need roughly ₹30,000 per month to reach the same ₹1 crore.
Same goal. Same time horizon. But you need almost double the monthly investment when you choose the safer route.
This is not an argument against safe instruments. It is an argument for being honest about their cost. Safety is valuable — but it is not free. You pay for it in capital deployed.
The Second-Order Effects Nobody Talks About
Now here's where it gets genuinely interesting. When you think past the surface, a few second-order consequences emerge that most investors — and even many advisors — don't fully account for.
1. Locking up more capital has an opportunity cost.
If you need to put ₹30,000 a month into debt funds instead of ₹17,000 into equity to reach the same goal, that extra ₹13,000 a month is no longer available for anything else — emergency funds, business investments, lifestyle upgrades, or family needs. Safety in one corner of your portfolio can quietly create vulnerability in another.
2. Inflation quietly erodes the "safe" story.
Fixed income at 7% looks safe on paper. But India's long-run inflation has averaged around 5–6%. Your real return — the one that actually matters — might be just 1–2%. That's not catastrophic, but it means the "safe" portfolio is often barely keeping you ahead of rising costs. You'd need an even larger corpus to account for this erosion. Equity's 12% gross looks more attractive when you factor in what inflation does to both sides.
3. Too much capital in safe instruments leaves less working harder.
One of equity's genuine advantages is capital efficiency — getting more output from less input. When you avoid equity entirely and rely on fixed income, you give up that efficiency. Your money is working, but it's working slowly. For a wealthy person with abundant capital, that's a reasonable trade. For someone still building wealth, it's a subtle trap that extends their timeline significantly.
4. Behavioural safety is worth something.
Here's the counter-argument, and it's real: many investors say they'll stay the course in equity during market downturns, but few actually do. The sleepless nights of a 30% market crash are real. If the psychological cost of equity volatility leads you to sell at the bottom, then the theoretical return advantage becomes meaningless in practice. A lower return you actually earn beats a higher return you panic out of. This is a legitimate reason to choose safer instruments — but it's a behavioural reason, not a financial one. Know the difference.
So How Do You Decide?
The answer comes down to three honest questions:
1. What is your corpus today, and what does your goal actually require?Run the numbers. How large does your corpus need to be, and at what return rate is it already sufficient? If 7% gets you there, equity isn't necessary. If 7% falls short, you likely need equity's growth to close the gap.
2. Can you afford to invest the larger amount that safer instruments demand?If you're choosing lower-risk products, make sure you're not underestimating how much more you need to invest monthly. The safety is real — but only if you fund it properly.
3. What phase of wealth are you in?Wealth building phase? Equity is usually essential for efficiency. Wealth preservation phase — large corpus, modest needs? Fixed income can often carry the load. Mixing up these phases is where most planning errors originate.
Equity is powerful. But it is a tool, not a commandment.
For someone building wealth with a modest monthly surplus, equity's compounding efficiency is hard to match — you can achieve more with less. For someone already sitting on a significant corpus with modest spending needs, it may be an unnecessary risk, not a missing ingredient.
The deeper point is this: how you invest and how much you need to invest are not separate decisions. They are the same decision, looked at from two angles. Choosing a safer instrument is not just a risk decision — it is also a capital commitment decision. It means putting more money to work, more consistently, for longer.
Know your phase. Run your numbers. Let the math — not the marketing — guide your allocation.
That's not financial blasphemy. That's just good planning. 🎯
Disclaimer: This content is for informational purposes only and does not constitute financial or tax advice. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.
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