Best investment options for highest long-term returns
Real Estate, FD or Equities?
A couple of days back, I came across an investor who was highly diversified and had several holdings across Real Estate, FD, Mutual Funds & Stocks. This got me thinking that most investors who’ve been in the market since the early 2000s have invested across Real Estate and FDs at least once in their lifetime. Understandable, they were in Vogue at the time. Indian Commercial Real Estate was just coming out of the post-2009 crash. FDs being the deep-rooted “Indian Savings of choice” was the safe haven to go to in times of volatility. Meanwhile, Equity Markets seem risky and all of us have heard of the dangers that be. But which of these have delivered the greatest long term returns? Let’s jump right into it.
Let’s look at the Data Story.
Wondering what this Journey Looked like?
Without a doubt, it’s clear that Equities is the way to go when you’re looking at creating Sustainable Long Term Wealth. While the Sensex is regarded as the pulse of the domestic stock markets in India, let’s take a look at the highs and lows of the Inflation-Adjusted Returns for all the asset classes being discussed over the last 30 years.
- The largest scam during the ’90s was the Harshad Mehta Scam in 1992 which caused a huge dip in the stock market. A large number of small-size investors became victims of the scam and the Sensex fell more than 570 points.
- Dot Com Bubble was a stock market bubble caused by excessive speculation of internet-related companies in the 2000s. The Nasdaq Composite stock market index rose 400%, only to fall 78% from its peak by October 2002, losing all its gains during the bubble.
- The Global Financial Crisis hit in 2007–08, a downturn in the US housing market was a catalyst for a financial crisis that spread from the United States to the rest of the world through linkages in the global financial system.
- Taper Tantrum 2013, was a panic kind of situation caused due to a spike in the U.S. Treasury yields. The Federal Reserves had announced that it would be reducing the pace of its purchases of Treasury bonds, to reduce the amount of money it was feeding into the economy.
- The 2016 Brexit impact was felt across currency markets with major equity indices losing 2–10 per cent. The impact was that Sensex opened lower by 635 points and went down by 1,091 points
- March 2020 saw one of the most dramatic stock market crashes in history. The ongoing Covid-19 Pandemic caused the Sensex to fall from 41,952 on 14th Jan 2020 to 25,981 on 23rd March 2020 but made a swift recovery to touch all-time highs in June 2021.
So What do we do?
- A firm approach that we believe is to cut out all the noise that plays with your investing psychology in the short run. When you’re seriously considering making sustainable long term returns, the one thing to keep in mind is — Go long or Go home. It’s that simple.
- Growth in the Indian markets is robust and inevitable. Whether it’s the Fintech sector, Pharmaceuticals, Agriculture, rapid innovation is happening everywhere which empowers the old systems making Companies much more efficient and profitable.
- If you have the power to remain in the markets for more than 5 years then you can ‘Safely’ invest in Equities.
