Capstone Project 2020-22

Final Report

Title of the Project:

New challenges for long-term investment

Submitted by:

Name of Dr. Samie Ahmed Name of Vineet Agarwal

Faculty Sayed the
Guide: Student:
Designation: Professor Roll No.: 20730020126
Program: PGDM-Finance
Batch: F1
Semester: 4th Sem

Institute for Technology and Management

Plot No. 25 / 26, Institutional Area, Sector – 4,
Kharghar, Navi Mumbai
 CERTIFICATE FROM THE FACULTY GUIDE

This is to certify that the Project Work titled New challenges for long-term
Investment is a bona-fide work carried out by

Mr./Ms , Vineet Agarwal………………………………………….

Roll No…20730020126…………………………………., a student of PGDM program

2020 – 2022 of the Institute for Technology & Management, Kharghar, Navi

Mumbai under my supervision & guidance.

Signature of Guide :

Name of Guide : Dr. Samie Ahmed Sayed

Designation: Associate Professor, ITM Kharghar

Date: 08/02/2022 Place: Kharghar, Navi

Mumbai
 ACKNOWLEDGEMENT

Execution of a project of this nature is impossible without active support from

the faculty guide and professors of the Institute. I would like to express my
sincere gratitude to my guide Dr/Prof Samie Ahmed
Sayed………………… for his/ her guidance during the entire project
duration.

I also extend my sincere thanks to all those who directly and indirectly helped
me to complete the project.

Name of the Student: Vineet Agarwal

Signature of The Student:

 INDEX

Content Page No.

Front Cover Page I

Certificate from the Faculty Guide II

Acknowledgment III

Executive Summary IV

Table of Contents V

Chapter 1 Introduction 7-19

Chapter 2 Literature Review 20-24

Chapter 3 Questionnaire 25-27

Chapter 4 Research Methodology 28-30

Chapter 5 Analysis & Interpretation 31-42

Chapter 6 Recommendation 43

Chapter 7 Conclusion 44

Chapter 8 45-46
References
 List of Tables

Chapter No. Contents Page No.

Table 1. Age and their purpose for long term investment 33

Table 2. Teenagers preference for long-term investing 34

Table 3. What long term is for investors? 36

Table 4. Challenges for long term investing 38

Table 5. Average amount to be invested. 40

Table 6. Consider risk before investing. 42

Table 7. Taxation impact on investment 43

 LIST OF FIGURES
Chapter Contents Page
No. No.
Fig. 1 Age and their purpose for long term
33
investment

Fig. 2 Teenagers preference for long-term

34
investing

Fig. 3 What long term is for investors? 36

Fig. 4 Challenges for long term investing 38

Fig. 5 Average amount to be invested. 40

Fig. 6 Consider risk before investing. 42

Fig. 7 Taxation impact on investment 43

Introduction
1.1General overview of the sector

Due to COVID-19 the recent financial and economic crisis has shaken the foundation of the
global financial architecture and raised challenging questions about the future global economy.
Long-term investing has not proved easy to define as it extra closely resembles an attitude
towards investing than an investing style that can be captured in a single formulaic sentence.
Although there are many different ways, long-term investing can be usefully defined as
investing with the expectation of holding an asset for an indefinite period of time by an investor
with the capability to do so. Typically this long-term investment is looking forward to being
held for at least 10 years. Critically, this definition focuses on the intent of the investor when
making the investment and the investor’s ability to follow through on that intention in the face
of market pressure.

A diversified and competitive financial sector is also important for promoting growth in
developing countries as it helps maintain economic stability, makes financial transactions
secure, mobilises external and domestic savings and facilitates the efficient allocation of capital
to productive investments. The World Bank’s 2005 World Development Report (World Bank,
2004) exactly highlighted that it is not just the quantity of investment that matters for promoting
growth, due to the plunge in marginal impact of additional investment in physical assets. What
ultimately counts are the effective gains that result from product and process innovations
brought about through investments, as well as the extent to which jobs and capital flow from
declining industries to expanding and emerging economic activities.
Types of investments
Investing is the most ideal approach to grow wealth and get our cash working for us – yet how?
There are numerous sorts of investment out there, each with its own particular level of risk and
return. The higher the potential restore, the higher the risk that we won't not recover all our
cash. So it's great to have a blend of various investment writes to spread risk and get the
outcomes we need. Furthermore, it's essential to get our work done and get investment guidance
so we comprehend the dangers previously giving over our cash.

Saving accounts; - When we store cash in a record we are really loaning it to the bank, which
pays us some interest for return. The loan fee is moderately low, so saving accounts are not the
best choices for long term investment.
Term deposit; - Like savings accounts, term deposit likewise pay premium. The distinction is
that we consent to loan cash to the bank for a settled time period, for example, 6 or a year as
an end-result of a higher rate of interest.

Bond - A bond resembles an IOU issued by an administration, chamber, or organization. We

loan them cash for various years, and they guarantee to pay a specific financing cost – called a
coupon. The level of hazard included when putting resources into bonds relies upon whoever's
issuing them. Not at all like term stores, can we offer bonds early. Anyway the value we will
get can go here and there. Bonds are additionally here and there called fixed interest investment.

Equities- When we purchase an offer, we're purchasing a little piece of an organization. In the
event that that organization profits, we might be paid an offer of the benefit, called a profit.
Like house costs, share costs are by and large anticipated that would go up after some time and
give a 'capital pick up' on our cash when we offer. In any case, costs can fall in an incentive
too.

Property- Comes back from putting resources into property originate from rental wage and
from any expansion in the estimation of property after some time – called capital pick up. A
few people see their own particular home as a venture since it might develop in esteem; anyway
it doesn't acquire the salary that letting property to different people or organizations does. It is
likewise essential to factor in the intrigue paid on a home loan while surveying the potential
for capital pick up. We can put resources into business property straightforwardly, or through
oversaw reserves.

1.2 Industry Trend

Information Technology (IT)

Internet evolution has caused advanced developments in the IT sector. Especially in the
years between 1990-2010 we have seen the internet explode exponentially. This triggered
the rapid growth and development in IT sector companies even more than manufacturing
companies. Due to high growth potential, IT companies can be considered as a safe bet for
the long-term investment. There various factors behind the growth potential of the IT
companies. Some of the factors include government policies like Digital India, technological
developments, economic needs, etc. Initiated by prime minister.
• FMCG (Fast-moving consumer goods)
FMCG is one of the safest sector for long-term investment in India. To put simply soaps and
shampoos are the FMCG product and we don’t see a production of these items ever stopping.
The FMCG products will always stay in public demand, unlike many sectors that follow the
contraction and expansion cycles. The latter ones are called cyclic industries. These are the
products which people have been using for over 100+ years and will continue in the future.
It is only logical to not buy an automobile during a recession or economic crisis but because
FMCG products are the basic essentials or daily base products- its demand won’t decrease
as much compared to the other industries. Hence, FMCG companies have very g ood
potential growth and safe industry to make long-term investment plans.
• Pharma (Pharmaceuticals)
Pharma is another wise selection as India is one of the largest exporters of generic medicines.
The current pandemic outbreak which brought the world to a standstill worked in the favour
of pharma companies. For a long time, the Pharma industry was under a long-term bear
market but recently entered a long-term potential bull market with huge buying volume.
Besides various Government programs and initiatives for rural health, preventive vaccines,
and mass checkups will always work in favour of pharmaceutical companies.
Not to mention due to COVID-19 the market is going bullish and only the reason on the
pharma and healthcare sector due to the increase in demand for medicines and drugs. The
ongoing health crisis made people aware of personal hygiene and safety. This will keep
demand for future in the products related to healthcare. If this demand is there Pharma
companies will continue to flourish.
• Infrastructure
India is a growing fast, and, in such nations, there is growth potential in the infrastructure
sector. Various government initiatives in developing public domains, building new airports,
redevelopment of housing societies, metro projects, etc. are ongoing in our nation. In all
these projects Infrastructure companies are the key players and hence become a safer sector
and obvious choice for long-term investment in India.
• Housing finance companies
As mentioned earlier India is a growing country hence the housing finance companies hold
great growth opportunities as infra increases. House finance companies are also a great
choice for long-term investments. This is because housing finance companies have cleaner
balance sheets as compared to banks. Not to forget the NPA is about 13%+ for banks and
only about 1% (-) for housing finance companies. This indicates that the housing finance
companies have better management.
• Automobile
According to reports by CNBC it is predicted that there will be 125 million electric vehicles
on road till 2030. This futuristic technology makes the automobile sector the better choice
for long term investment. To develop efficient EV, batteries should be powerful to cover
longer distances without discharging. To make better EVs many companies are already
working on improving the technology of existing models. Hence, the automobile sector has
an amazing potential to reward its shareholders in the long-term investment.
To sum up you can diversify your portfolio by selecting the best sectors for long -term
investment in India. Hence, allocate funds in such a way that you make the best long-term
investments and invest in different sectors.

Declining holding periods for public stocks, the rise of high-frequency of trading, shortening
average CEO’s tenures and a disproportionate focus on quarterly earnings are regularly cited
as evidence for growing short-termism in markets. As a result, the role of long-term investing
has received increasing attention. Recognizing the increasing significance of long-term
investments, this report explores the role of long-term investing and long-term investors in the
global financial system.

1.3 Government Policies on Long Term Investment

GOVERNMENT POLICIES AND A STABLE ENVIRONMENT FOR INVESTMENT
Frequent upheavals in the marketplace or uncertainty about the terms and directions of
competition add a significant element of risk to longer-term business decisions, which drives
companies to seek better recovery of their investments in the shorter period of time and
dampens investment in activities that, by their very nature, will take substantial time to come
to fruition. Federal, state, and local governments play a crucial role in the affairs of industries.
The policies, routines, and practices of governments can

Top of Form

Bottom of Form
either improve or erode predictability (decrease or increase risk) in markets and technologies
and there by determine whether an environment is conducive or inimical to long-term
investment.

The Mixed Impact of Regulation and the Legal Environment

On the one hand, stable and predictable regulation for worker and consumer safety and
protection of the environment can drive important, efficient and innovative
developments with positive long-term consequences. Waste and emissions standards
establish fixed targets for improvsed processes and, as such, can encourage innovative
approaches to problems of the solutions; for example, product innovation in the
automobile sector to reduce pollution has resulted in major innovations. Providing
incentives to minimize wastes in industrial processes in the factory are not only may
improve the environment but also may reduce production costs. The result of these
regulations can be to create a reliable "playing field" for competitions, thereby
improving the long-term health’s and capability of these factories, and to increase
competitiveness in global markets. On the other hand, yearly changes in tax policy,
regulatory structures, government licensing practices, and other forms of government
inter-relation with industry can be quite damaging.

The Government's Role in the Creation of Stable Markets

Among the ways in which governments promote long-term investment is the role they
play in the creation of markets or market-places. First, the government's considerable
buying power has created predictable markets for "public" consumable goods, some of
which have become private goods. Commercial passenger and freight aircraft, created
in part by government investments in, and demand for, defence aircraft, are a classic
example. Additionally, markets for private-sector weather prediction and back-watch,
environmental monitoring and waste disposal, public health systems, or large-scale
satellites, computer, or networking systems are based on, or were supported by, market
created by government purchases, often in combinations with govt. R&D.
What risks have been considered?
Investment risk: The possibility that changes in the values of, or income from, assets cause a
long-term investor were failing to achieve the goals over its investment horizon.
The categories of long-term investor covered will include those which have liabilities based on
some demographic factors and some form of real value or surge in inflation-based guarantees,
i.e. a pension fund or insurer with long term liabilities. Although the background context of
industry practices and regulatory aspects originates from the INDIA perspective, the economic
principles are globally applicable. The focus is on the investor’s long-term investment strategy
and planning for achieving an optimal economic risk/return payoff, and the numerous
challenges in managing stakeholder perceptions, behaviours and actions.

1.4 Contribution to GDP

• Under all scenarios, jobs created are disproportionately male, Latino, and skewed
away from younger workers.

• Under scenario one, male employment accounts for 77 percent of all jobs created,
while under scenario two it accounts for 80.4 percent of all jobs created, and under
scenario three it accounts for 74.1 percent, compared with an economy-wide
average of 50.2 percent of all jobs being held by men.

• Under scenario one Latino employment accounts for 15.4 percent of all jobs
created, while under scenario two it accounts for 16.2 percent of all jobs created,
and under scenario three it accounts for 14.3 percent, compared with an economy-
wide average of 12.3 percent.

• Under scenario one, employment of young adults (under 25 years old) accounts
for 9.3 percent of all jobs created, while under scenario two it accounts for 9.5
percent of all jobs created, and under scenario three it accounts for 7.8 percent,
compared with an economy-wide average of 13.2 percent.

• Under all scenarios, jobs created are disproportionately filled by workers without
a four-year university degree. Under scenario one, workers with a bachelor’s
degree or more education fill 23 percent of all jobs created, while under scenario
two college-educated employment accounts for 19.6 percent of all jobs created,
and under scenario three it accounts for 21.4 percent, compared with an economy-
wide average of 32.6 percent.
 • Under all scenarios, jobs created are disproportionately middle- and/or high-wage.
Under scenario one employment in the bottom wage quintile accounts for just 9.5
percent of all jobs created, while under scenario two it accounts for 9.4 percent of
all jobs created, and under scenario three it accounts for 11.2 percent of all jobs
created, compared with an economy-wide average of 18.9 percent.

The focus of this research paper is on long term investors and their perception. The notion of
‘long term’ will vary from investor to investor. Some cycles such as economic, business,
investment, or valuation cycles, do provide a rough calculation of the minimum time frame
which might be considered as long term. For this research, the authors have not sought to be
too precise on the definition of long-term investment, so perhaps institutions investing for
periods over 10-15 years could be considered the starting point.

1.5 SWOT Analysis of Long-Term Investment

Strengths

Understanding the strengths of the company you are investing for long-term is a big
deal. For many companies, leveraging their strengths is what has made them
successful over the years.

For example, for many companies, it is rare there isn’t a competitor in their space.
Google is a prime example. It has been so successful because it has strength in
developing a superior search product. Others try to compete, but are not as
successful. The same is true for many companies.

Here are some potential strengths to consider:

• Management (or people, employees, research, etc.)

• Products or services (superior, patent-protected, quality, speed, etc.)
• Margins (reflection of operations, product, etc.)
 • Customers (loyal customer base, need vs. want)

Every company and every market will have different strengths and weakness. For
example, many tech and pharmaceutical companies rely on patent protection for
their products. However, these patents are granted because of people or research, or
maybe good acquisitions. It is important to know the reasons and glitches why and
analyze the strengths.

Weaknesses

This is just as vital as knowing the strengths of the company — the weaknesses will
tell you the potential downfalls. Many times, it can be hard to figure out a company’s
weaknesses, because most companies work very hard to only show their strengths.

A good place to look for company weaknesses is in the fundamentals, especially

the notes to the financial statements. It is in the section that the company tells their
potential liabilities, as well as where they see potential competition or opportunities.
With this information, you can gauge the company’s weaknesses and make a more
informed investment decision.

Here are some potential weaknesses to consider:

• Product liability
• Financial strength
• Management/people
• Continued innovation

Once again, depending on the market, every company’s potential weakness will be
different. For example, utilities don’t have to worry about competition because they
have a monopoly over their service area. However, regulation of utilities can impact
financial strength, and can also create high liabilities in areas such as environment or
safety.
Opportunities

This can be a hard one for individual investors to figure out. It basically means
opportunities this company has to grow further, or otherwise increase profitability
for shareholders.

Some companies can benefits from macroeconomic (market as whole) trends that
are easy to spot. However, for other companies they can be difficult to spot. For
example, it may have been hard to understand the opportunity Apple was pursuing
with its first iPod, since it was such a revolutionary product.

Here are some common opportunities to think about:

• Internal growth opportunities (new markets, new product)

• External growth opportunities (mergers and acquisitions)
• Macroeconomic trends (resource scarcity; for example, oil)
• Social trends (social networking, the cloud, what’s next?)

This is where reading through an entire annual report for a company can be so useful.
Usually, in the first section (which is in color and printed on high-quality paper),
companies will discuss what opportunities they are going after. This can be a good
indicator of what to expect, and you can analyze it and make your mind on an
investment based on your thoughts.

Threats

Finally, every investor needs to look at direct threats to their investments. This is
more than just the weaknesses of the company — these are direct-impact items that
everyone needs to pay attention to.
For example, a weakness of a toy companies could be that it has high liability
potential around selling toys to kids. However, the direct threat to the company can
be pending litigation around toy safety.

Every company has threats, and these external factors need to be carefully
considered by investors.

Some common threats include:

• Litigation
• Government legislation
• Direct competition

Once again, the notes to the financial statements can provide great insights into
potential threats to the company.

We'll probably be able to spot the short-term investors that aren't covered. We don't pay
attention to investors who are mainly concerned with instantaneous market prices and
volatility, and for whom market crashes will result in irrecoverable losses or the crystallisation
of risk events.

BCG MATRIX

Cash Cows (low market growth, high market share): These are strong competitive
businesses which generate cash surplus (++) (i.e. cash in excess of what is needed to maintain
the business). Typically, cash cows have a strong brand recall which allows the company to
charge higher prices than its competitors in market. The excess cash generated could be
deployed by the company for dividend payments, debt repayments, new technologies and in
driving future growth in other segments of the company (i.e. in the Question Marks or Stars of
the company).
Stars (high market growth, high market share): Stars represent businesses which have a
high market growth share in a fast-growing industry. However, since they operate in a fast-
paced industry, they require huge amounts of investment to be in the market leadership. The
intention in running businesses is to turn them into cash cows of the future. Once such
businesses sustain their market leadership power for a long time, they are more likely to turn
into Cash Cows, especially when the economy breaks down, if not, they may have to be
divested (like Dogs).
Question Marks (high market growth, low market share): Question Marks are businesses
which hold a small share in a fast-growing industry. The future performance of these businesses
is uncertain. Companies should invest very carefully in Question Marks. If their performance
does not live up to the expectations, Question Marks should be reclassified as Dogs and should
be divested.
Dogs (low market growth, low market share): These are businesses which have a low market
share with no scope for growth. Because these businesses do not hold much economic promise,
organization should either not invest in them or sell them as soon as possible.

Investment horizon is the total length of time that an investor need to hold a portfolio. Classical
actuarial thought suggests that this should be based on the nature of the liabilities. For example,
a pension fund might be expected to meet our most of its liabilities in the next 15-30 years but
still needs to meet liabilities of cash flows covering say 75 years, until the last pension
beneficiary dies and documents of proof submitted.

1.6 History of Long-Term Investment

Returns from asset classes are never consistent. Which takes into account both the Global
Financial Crisis and the most recent markets volatility stemming from COVID-19, the long-
term performance stories across different asset classes is starkly different.

In 2019, for example, Australian listed property was the best-performing asset class, delivering
a return of 19.3%. In the year to 30 June 2020 the very same segment was the worst-performer
in all sector, producing a negative return of 21.3%.
Similarly, going all the way back to 1990-91, cash returned an impressive 13.5%, while
Australian bonds were the best-performing assets in all, returning 22.4%. In the last financial
year however, cash and Australian bonds returned just 0.8 per cent and 4.2% respectively.

That’s why asset diversification is so important over the long term to spread investment
performance risk.

Anyone who was solely invested in cash over the last 30 years would have achieved the lowest
per annum investment returns. Cash has delivered a total annual return of 5.1% since 1990,
compared with the 8.9% per annum return from Australian shares.

A $10,000 investment into cash 30 years ago would now be worth $44,172 – roughly a fourfold
increase. By contrast, the same amount invested into Australian shares would have
compounded to more than $130,000 if all dividends received had been reinvested along the
way.

1.7 Scope of study

1. Selection of Right Assets: Investment decisions help in choosing right type of

investment plan for deploying the funds. Each of available opportunity is
properly analysed by management while taking investment decisions. This way
every aspect of asset’s available for all investment is taken into consideration
which leads to building up a strong portfolio.
2. Identify Degree of Risk: These decisions help in identifying the level of risk
associated with an investment opportunity. Decisions are taken on the basis of
expected return (RM) and risk required for earning such return. Managers
properly modify assets using various tools for finding out the risk on their levels
while taking investment decisions.
3. Determines firm Profitability: Decisions regarding investment plans
determines the future profit earning potential of a firm. A right decision may
bring huge amount of funds to an organization leading to better growth in nearer
future. Whereas, any wrong decision regarding deployment of funds may cause
huge losses and even adversely affect the continuity of firm.
4. Enhance Financial Understanding: Investment decisions imparts large
amount of beneficial financial knowledge to individuals taking these decisions.
Investors while choosing the portfolio uses a variety of tools and techniques for
analysing its profitability. It provides a lot of information which enhances the
overall financial knowledge and enables investors to make rational decisions
regarding investment.
5. National Importance: These decisions are of national importance for a nation
as it leads to overall development and growth. Investment decisions taken
determines the level of employment, economic growth and economic activities
in a country. More amount of investment creates better supply of funds in an
open economy which increase the pace of overall economic development of the
market.
CHAPTER-2 LITERATURE REVIEW
Review of Literature

1. While the conventional wisdom is correct—that stocks historically have been a safer
investment for long-term investors—the required holding periods are probably much
longer than is practical for many investors. (Shen, 2005)
2. We focus on the potential long-term investors themselves as opposed to retail investors
or organizations or vehicles that may serve as intermediaries (e.g. mutual funds, index
funds and the general partners that manage private equity funds). (Ailman, 2012)
3. We first study whether firms with more short-term investors reduce long-term
investment, which we proxy using R&D expenditures. We focus on R&D as these are
discretionary long-term investments that contemporaneously depress earnings.
Reducing R&D can therefore immediately lead to higher current earnings, which can
boost the stock price in the short term if information asymmetry exists and investors or
analysts use income-based multiples that translate higher earnings into higher equity
valuations. (malloy, 2017)
4. We provide evidence that the presence of short-term investors is associated with cuts
to long-term investment in order to generate earnings surprises, leading to temporary
boosts in the stock price. Short-term investors benefit from temporarily inflated stock
prices, as they subsequently leave the firm so that only long-term shareholders suffer
from the reduction in long-term investment and equity value. (Martijn Cremers, 2003)
5. Assets that are appropriate for long-term investing are generally more illiquid and
longer-term, and thus considered riskier. However, as indicated previously, there are
assets that can be part of either a long-term or a short-term investment strategy, such as
public equities. (WYMAN, 2009)
6. The second benefit arises from the nature of most long-term investors. Institutions that
make long-term investments are often very large. For instance, the top 10 sovereign
wealth funds, pension funds and life insurers each have at least US$ 100 billion in
assets. (fernandes, 2010)
7. In contrast with the traditional approaches of port-folio management theory, assuming
that over long-term investment horizons stock investments are more preferable than
bonds in terms of the risk–return ratio, the method used in this article has proven the
opposite assumption. (Abramov, 2015)
8. A superior comprehension of the relative significance of the components diminishing
the probability that such venture happens is hence imperative. A second component is
 whether financial investors relate long term investments with the goals that encourage
the arrangement of worldwide open products. (tayde, 2018)
9. It likewise implies there is a more noteworthy possibility that long term investors can
use the upside of their investment horizon and assume basic parts in encouraging the
arrangement of certain worldwide open merchandise. (Harvey, 2011)
10. It is likewise essential to factor in the intrigue paid on a home loan while surveying the
potential for capital pick up. We can put resources into business property
straightforwardly, or through oversaw reserves. (VICEIRA, 2004)
11. Long term investors are concerned about risk over the full term of their liabilities rather
than solely the short term. Most financial firms will project their business over longer
time-frames than one year, and it would be logical if the risk measurement approach
focussed on the ultimate risk. (Jinks, 2019)
12. These insurers face “lumpy” liability streams that they offset by keeping as much as
10% of their assets in cash and 70% in bonds. They will typically blend equities and
other assets in the balance of the portfolio to provide for some long-term growth.
Among the large property and casualty insurance general accounts are Chubb and State
Farm Mutual Automobile Insurance Company. (Brigandi, 2018)
13. Women face specific constraints to participating in labour, financial, goods and services
markets because of social norms, biases, prohibitions and gender divisions of labour.
(Bris, 2019)
14. Value managers must incur an extra cost that index investors do not pay. That cost is
research. This means that indexers have a cost advantage in the marketplace that will
cause them to outperform over time and on average. Value investors, each trying to beat
the performance of the others, must actually research the companies in which they
invest. As hard as it is to believe, indexers do no research at all. (LYDENBERG, 2007)
15. From the private benefit perspective, the key issues are the magnitude and nature of the
opportunities faced by long-term investors, and how these opportunities might be captured.
These issues will be addressed in the second paper in this series, which will present an analysis
of potential gains from both accessing liquidity premiums and related dynamic strategies
through unlisted assets. (Warren, 2014)
16. While no over-arching theory on what determines horizon is uncovered, a wide range of inter-
connected influences can be identified. Investment horizon seems to emerge partly as a function
of circumstances, partly as a consequence of how the investing environment is designed, and
partly as a result of choice by those making the decisions. An understanding of these influences
 provides a foundation for the third paper in this series, which will put forward suggestions for
encouraging more institutional investors to adopt a long-term approach. (Warren, 2014)
17. Short-term investors may pay to avoid short-term market volatility as a whole for a
number of reasons. Short-term volatility in asset values can matter where concerns exist
over short-term obligations related to capital requirements, solvency or spending
commitments, e.g. defined benefit fund sponsors, insurance companies, leveraged
investments, and pension fund members nearing retirement. (Warren, benefits of long
term investment, 2014)
18. Long-term investors have the capability to adopt dynamic strategies which may not be suitable
for short-term investors due to the nature of the payoff timing, the requirement for discretion
over trading, and the need for a keen perspective on long-term drivers of returns or value to
implement effectively. (Warren, benefits of long term investment, 2014)
19. Women have been found to be less likely than men to have a defined contribution (DC)
pension plan (Sunden and Surette, 1998). Consistent with the finding that they tended
to hold more conservative asset classes in their overall investment portfolios
(Jianakopolos and Bernasek, 1998), women with DC pension plans in the US allocated
a smaller proportion of their plan to stocks (Bernasek and Shwiff, 2001). In a study
carried out in Australia, women chose more conservative investment plans for their
superannuation schemes than men (Watson and McNaughton, 2007).
Objectives of the study
• To determine the general attitude of the population and the government to wards
investment activities.
• To investigate the nature and level of investment activity in the zone and surroundings.
• To know the challenges people were facing in long term investment.

Hypothesis
H0: there is no significant difference in long term investments challenges

HA: there is significant difference in long term investments challenges

QUESTIONNAIRE

Mention Your Age

What is your annual income?

• 500000
• 800000
• 1000000
• 1000000+

The purpose for long term investment

• World Tour
• Retirement
• House
• others

Which option is best for the long term?

• Equity
• Mutual fund
• Debt
• Real estate
• Gold
• Fixed deposit
• Others

What is your long-term investment period?

• 5
• 10
• 20
• 30+

Is Tax rate affect your investment decision?

• Yes
• No

What challenges you are facing while doing Long term

Investments?
 • Lack of industry expert
• Fluctuating of Market
• Unstable income
• Fraud in name of High return

What criteria do you use when assessing such Investments?

• Regulatory Safety
• Risk
• Better Returns
• Liquidity

Should Investments have Redemption Rights?

• Period less than a year
• Yearly
• Some longer set period
• No rights from the fund manager

How much money are you approximately looking to invest?

• 2.5L
• 5
• 10
• 10+

I would go for the best possible return even if there were risks
involved
• Always
• Usually
• Sometimes
• Rarely
• Never

How would you describe your typical attitude when making important
financial decisions?
• Very adventurous
• Fairly adventurous
• Average
 • Fairly cautious
• Very cautious

What amount of risk do you feel you have taken with your past
financial decisions?
• Large
• Medium
• Small
• Very Small

When I consider investments that have an element of risk I feel quite

anxious
• I strongly agree with this statement
• I tend to agree with this statement
• In-between
• I tend to disagree with this statement
• I strongly disagree with this statement
Research methodology

When speaking about investing, people often make statements to the effect that the tried-and-
true investment basics haven't changed in many years: as long as you stick to these principles,
you have a better chance of being successful. While this may be true in a few instances—for
example, buy low and sell high—the investing landscape has been changed in most other
respects. There are many best challenges that modern investors face.

Incredible Volume and Speed of Information

Perhaps the most daunting challenge that modern investors face is the sheer speed and volume
of data. In the past, solid information about publicly-traded ltd companies had hard to come by
outside of the annual and quarterly reports. The WS Journal and a limited number of finance-
related publications attempted to summarize business news and disseminate it. But this news
moved to the greater public at the speed of light (if it reached them at all). To be reported, a
story had to be significant; even then, it had to be written up, printed, or delivered.

Finding the Right Resource

The difficulty of finding the right resource is tied to the challenges of there being too much raw
data available. As an investor, how do you find good resources in the pool? To be clear, having
lots of choices and easy access to free resources is an overall win for modern investors. But
research can be daunting when there are too many choices. While investing primarily deals in
facts, opinion colors many areas (such as whether technical matters more than fundamentals or
vice-versa).

With time, many investors learn to filter out information and create a select pool of reliable
sources that match their investing tastes. Until then, however, it is hard to avoid being
overwhelmed by the range and variety of opinions out there.

The Reactionary Market

Even if you have a good handle on quality information, you can still get plunged your savings
when accurate information or basic uncertainty hits the market. Inaccurate information still hits
the market on daily basis, even though the time to correction/exposure is often shorter.
Inaccuracies can be honest mistakes, malicious practices done, or even financial fraud on the
part of corporations. More importantly, the financial markets are so addicted to the constant
information flow that an interruption in the flow or genuine moments of uncertainties can be
worse than bad news.

Market reactions have always been another level, but the increasingly global reach of
information has given investors more reasons to overreact (literally on a per hour basis). It
doesn't leap imagination to see good-bad consequences with every headline that pops up in the
feed.

The Choices
When does choice become overwhelming? There are conflicting studies about the limits of the
human mind when faced with a new portfolio of choices. Research suggests that we chunk
choices into a manageable (between three and eight, for example). This works in an ice cream
shop with numbers type of ice creams. But the world of finance offers far more than 80 types
of stock investments. When faced with all these choices, we may attempt to find half-ways to
chunk our options down to a 1. This is useful, but it may also lead to us discounting the best
option. For example, someone looking for regular income may freeze their options down to
dividend-paying utility stock when they may have been well served by a dividend exchange-
traded fund (ETF).

SAMPLING DESIGN:-

Universe: Investors

Sample unit: Age group (22-65)

Sample size: 70+

Data collection tools:

o Responses through online Questionnaire

(google forms)

Primary data and Secondary data both are used in this research study.

These are the data that are collected for the first time by an investigator for a specific purpose.
Primary data are ‘pure’ in the sense that no statistical operations have been performed on them and
they are original. An example of primary data is the Census of India.
They are the data that are sourced from someplace that has originally collected it. This means that
this kind of data has already been collected by some researchers or investigators in the past and is
available either in published or unpublished form. This information is impure as they may have
already performed statistical operations. An example is an information available on the
Government of India, Department of Finance’s website, or in other repositories, books, journals,
etc.

Sampling method

The sampling method is a random and non-random sampling method. Here we used the
convenience sampling method in the project.

Data collection instrument

➢ Multiple choices question

➢ Likert scale question

Limitations

1. There is no specific definition for Long-term investment.

2. It doesn’t include any specific Age group and Geographical area.
3. Options for investment are more and hard to compare.
4. Lack of information about investment options to investors.
ANALYSIS & INTERPRETATION
ANALYSIS TABLE 1: Age and their purpose for long term investment

Figure 1

18

16

14

12

10
No
8 Yes
6

0
21 22 23 24 25 28 32 40

I had asked in my questionnaire what are the purpose of your investing or what are
the reasons for long-term investing. 28 out of 68 people are not aware that why they
are investing or options were not which I mention in the questionnaire. People were
saving and investing for world tour purposes and people at the of 22 and 23 must
have a motive for a world tour. But as we see people also invest for retirement
purposes. According to the Transamerica Center for Retirement Studies, the
median total household retirement savings across all workers is approximately
$93,000.
Forty-eight percent of workers believe they don’t make enough money to
adequately save for retirement.rForty-three percent of workers guess how much
they need to retire, rather than basing it on current expenses (38 percent) or using
a retirement calculator (25 percent). Twenty-two percent of Americans have less
than $5,000 saved for retirement, and 15 percent have no retirement savings
whatsoever. In a 2020 survey by TD Ameritrade, 58 percent of Americans said
they would grade the adequacy of their retirement savings at a C or lower.
Seventy percent of millennials are stressed and anxious about saving for
retirement. A majority of millennial investors (81 percent) already have a strategy
to protect themselves from outliving their savings.
ANALYSIS TABLE 2: Teenagers preference for long term investing

Count of Which option Column

is best for long term Labels
Fixed Mutual Real Grand
Row Labels Debt Equity Deposit Gold funds Others estate Total
21 4 1 4 9
22 2 9 2 3 4 1 1 22
23 7 2 1 5 1 3 19
24 3 1 1 3 1 9
25 2 1 2 5
28 1 1 2
32 1 1
40 1 1
Grand Total 2 27 6 6 15 2 10 68
Figure 2

16

14

12

10
No
8
Yes
6

0
21 22 23 24 25 28 32 40

As a result, Equity as an asset class has been able to beat inflation over the years, which is the
single most important reason for one to invest in Equity. Earning returns on your savings at a
rate which is higher than inflation is required to preserve the value of your savings. For example,
let’s assume you can buy 50Kg onions with Rs. 1,000 today. Now if you put the money aside as
savings for 5 years, you should still be able to at least buy the same quantity of onions with the
savings plus returns on the savings, after expiry of 5 years. Now, if the prices of onion increase
by 50% during this period, but your savings increase by only 30%, then you will be able to buy
lesser quantity of onions after 5 years. So, you are worse off by savings. Instead, if your savings
increase by 70% during this period, then you would be better off by saving and investing. Hence,
ability of your investment to earn returns which are higher than inflation, becomes a very
important factor in choosing the investment option.

Indian economy is expected to grow at an average of 7% pa over next many years. Add expected
average inflation rate of 5% pa, and any well managed business should be able to grow at about
12% pa, which means one could expect this kind of return by investing in stocks of large listed
companies over a longer term. No other asset class can provide this kind of inflation beating
returns! While investing in Equity, investors should visualise themselves to be an owner of the
particular business and whether this business will keep growing along with economy in the long
term. And if yes, wouldn’t they like to keep holding their stake in the business? See the kind of
growth companies like HDFC, Infosys, Maruti have seen in last 15-20 years.

According to my survey people have complete faith in the equity it might outperform in 2020-
2021. More and more retailers joined stock market due to lockdown people need second source
of income. People earned 80-100% of their capital in this year.

Second most liked option is mutual fund slow and best compounding method to grow your wealth

this is managed by high professionals fund house managers. It is safe as it does not fluctuate more

as compare to equity stocks.

ANALYSIS TABLE 3: What long term is for investors?

Count of What is your long-term investment period? Column Labels

Grand
Row Labels 5 10 20 30+ Total
21 1 5 2 1 9
22 3 12 5 2 22
23 3 7 5 4 19
24 2 4 2 1 9
25 3 1 1 5
28 1 1 2
32 1 1
40 1 1
Grand Total 13 30 16 9 68

Figure 3

16

14

12

10
No
8
Yes
6

0
21 22 23 24 25 28 32 40

One year is too short a period for equity investing. For the right answer, let’s get back to the
basics and ask the fundamental question: Why should equity investing be done only for the
long-term? The answer, of course, is, to deal with volatility. Over a period like five or six years,
the returns are often great, but the variability is high. In any given short period, you could
face poor returns, or even losses.

There’s another way to look at it. The equity markets move in cycles, and often, it takes five
to seven years to go through a full cycle of a sharp rise, decline and stagnation and back. To
get the right level of returns, we need to invest through the whole cycle. That won’t happen
in a year or even two years.
There’s yet another way of looking at it, which was the subject of a unique study that Value
Research conducted a couple of years ago. For a typical fund with a multi-decade history, over
all possible one year periods, the maximum returns are 160% and the minimum -57%. Over
two years, this becomes 82% and -34%. Over three, 63% and -18%. Over five, 54% and 4%,
meaning never any loss. Over 10 years, the maximum is 30% and the minimum 13%. These
are all annualized figures.

People are investing for a time period of 10 years there are many reasons behind it eg. House,
gold, world tour, further studies, etc. according to the survey people are not focusing on
20years+ of investing, also this required a lot of patience as well as risk taking capacity.
ANALYSIS TABLE 4: Challenges for long term investing
Count of What challenges you are facing
while doing Long term Investments? Column Labels
Fraud in
name of Lack of
Fluctuating High industry Unstable Grand
Row Labels of Market return expert income Total
21 3 2 3 1 9
22 7 1 7 7 22
23 12 1 6 19
24 8 1 9
25 1 2 2 5
28 2 2
32 1 1
40 1 1

Figure 4
Grand Total 35 5 14 14 68
18

16

14

12

10
No
8 Yes
6

0
21 22 23 24 25 28 32 40

In any case, investors trying to fund their long term spending needs may look at securities and
values in an altogether different light: They may esteem the way that, paying little respect to
their fleeting changes in costs, securities offer a sheltered cash flows flows—their coupons,
and their chief toward the finish of the life of the security—while cash flows from stocks are
not ensured.
In recessions, even as long term essentials continue as before, financial specialists might be
less eager to hold stocks in their portfolios, making their costs fall, while in developments they
might be all the more ready to hold stocks, making their costs rise. In this manner stocks give
off an impression of being more dangerous at short horizons than they do at long horizons. A
long term perspective of putting takes into thought reinvestmeazard.
As we know that there is no correlation between the stock market and the economy because
after doing good business for several years their stock price are below book value. Due to high
VIX of the market people hesitate to invest in the long run investment. As data shown in table-
4 51% people avoid long term investment due to fluctuating of market due to many reasons
policies of govt., merger & amalgation many more.
ANALYSIS TABLE 5: Average amount to be invested.
Count of How much money are you Column
approximately looking to invest? Labels

Row Labels 5 10 10+ 2.5L Grand Total

21 4 1 2 2 9
22 5 2 1 14 22
23 7 3 9 19
24 5 1 1 2 9
25 1 4 5
28 1 1 2
32 1 1
40 1 1
Grand Total 21 5 10 32 68

Figure 5

16

14

12

10
No
8
Yes
6

0
21 22 23 24 25 28 32 40

Mutual funds can be of great help to plan your future. In fact, the best utilization
of mutual funds happens when you stay invested for an extended period (five
years or more). The power of compounding, coupled with a long-term investment
horizon gives investors excellent returns in the long run. When the markets are
favorable, mutual funds can offer returns in the range of 15% to 18%. It is crucial
to implement the 50:30:20 rule in your financial plan. One should invest at
least 20% of their salary in mutual funds and can later increase whenever
possible. People are ready to invest 2.5lakhs in a year for better returns in
long-term investing as we see in table 2 data people were earning 10lakhs
as average and investing 2.5 lakhs which is 25% and might be acceptable.

ANALYSIS TABLE 6: Consider risk before investing.

Count of What amount of risk do

you feel you have taken with your Column
past financial decisions? Labels
Very Very Grand
Row Labels Large Medium Small large Small Total
21 3 3 2 1 9
22 3 10 8 1 22
23 16 1 1 1 19
24 2 3 2 2 9
25 4 1 5
28 2 2
32 1 1
40 1 1
Grand Total 8 39 15 5 1 68

Figure 6

16
14
12
10
No
8
Yes
6
4
2
0
21 22 23 24 25 28 32 40

Long-term investors are concerned about risk over the full term of their

liabilities rather than solely the short term. Most financial firms will

project their business over longer time-frames than one year, and it

would be logical if the risk measurement approach focussed on the

ultimate risk.
While we talk about investing we know it involves risk and investors take

the medium-capacity risk and who were investing for years know that

the average return they get 12-15%. One should keep doing research

about sectors that are performing and on what factors will outperform

in the future.

ANALYSIS TABLE 7: Taxation impact on investment

Count of Is Tax rate affect your investment Column

decision? Labels
Row Labels No Yes Grand Total
21 2 7 9
22 6 16 22
23 4 15 19
24 5 4 9
25 2 3 5
28 2 2
32 1 1
40 1 1
Grand Total 21 47 68

Figure 7

16

14

12

10
No
8
Yes
6

0
21 22 23 24 25 28 32 40

We have protected the interests of the retail investors by giving an exemption for
gains up to Rs1 lakh. The whole idea of levying LTCG is that we should not leave
one class of assets absolutely without any taxation. LTCG exemption was an
attraction for new investors in equity/equity mutual funds and brought funds from
other low-paying avenues.
After giving relaxed by the government the retail investor invests more in the stock
market so that they can get benefit from this amount. 70% of the investor think of
the taxation before investing which plays vital role at the end of financial year.
Recommendation
Long-term investors face fundamental tension when attempting to find appropriate measures

for the performance of a long-term investment strategy. I expect that key trends such as
demographics (i.e., ranking countries according to demographic profiles) will be included even
more aggressively in the portfolios of leading global investors. Be guided by megatrends
seeking to avoid disruptions for key portfolio holdings and to capture long-term growth
opportunities. Do not mix up long-term trends with hypes!

Capturing the return opportunities provided by disruptive trends requires investing more in
private markets from where new business models often emerge. Long-term investments are
particularly strong when combined with counter-cyclical strategies – but are sponsors prepared
to go against the trend.

First study whether firms with more short-term investors reduce long-term investment, which
we proxy using R&D expenditures. focus on R&D as these are discretionary long-term
investments that contemporaneously depress earnings.
Conclusion
we can see from the report that the new investors are seeing equity and outperform as the
market is giving returns better compared to mutual funds. People can hold their money for 5-
10years as seeing investing as long term as taxation benefits will also be there and investing
size is 25% of their earning which is approx. 2,25,000 to 2,50,000 which is risky if investors
don’t research the sector on yearly basis and keep moving their funds safely from one to another
sector from time to time.

Three key advantages held by long-term investors include the capacity to adopt positions where
payoff timing is uncertain; the ability to exploit opportunities generated by the actions of short-
term investors; and latitude to invest in unlisted and/or illiquid assets.

According to the interpretation, HA Hypothesis is selected that people face many challenges
in a long-term investment like taxes, market fluctuation and Business cycle, etc.
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