AS an investment advisor, you would think I spent most of my time equipping people with brilliant investment strategies.

In reality, a huge chunk of my time goes in clarifying the basics, especially where equity is concerned. The eternal question people ask is, should I invest in equity?

Let me answer that by getting some facts right.

Fact 1: Over the long term horizon, equity investments have given returns which far exceed those from debt-based instruments. They are probably the only investment option that can build large wealth.

Fact 2: In the short term, equities exhibit very sharp volatilities which many of us find difficult to stomach.

Fact 3: Equities carry lot of risk even to the extent of wiping out our entire corpus.

Fact 4: Investment in direct equity requires us to be in constant touch with the market and do a lot of research.

Fact 5: Buying good scrips requires fairly large investments.

Doesn't sound too good, does it? But if you can overcome these problems, go for equity.

You could also consider systematic investing in a mutual fund. It helps prevent the pitfalls of equity investment while you can enjoy high returns. This is all the more important today when the stock markets are booming.

Photograph: Christopher Furlong/Getty Images

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e-mail: Sanjay Matai

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