An interesting tidbit of info!

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The price of gold had increased by about 2000% since the year 1981; during the same period, land properties in metro cities and suburbs had appreciated by 20000% to 40000% ; take for example the price of 10g standard gold; it was about INR 1670/-in 1981 ; it ruled at about INR 30000/- in the year 2013; this works out to CAGR* of about 9%;

*compounded annual growth rate

Bank fixed deposit certificates, during this period, gave a CAGR of about 9%;

During the same period the inflation grew up by a CAGR of about 7%;

During this period a plot of one Ground (2400 sq.ft.) in South Chennai went up from about INR 1 lac to INR 400-450 lacs; this gives a CAGR of about 20%;

The BSE sensex, during this period, grew from about 175 to 19000, giving a CAGR of 15%;

So if we take the real CAGR (nominal CAGR less the inflation), it works out as follows:

Gold – 2%

FD’s – 2%

Stocks – 8% (this will be higher if we consider the dividend payouts)

Land – 13%

Of-course all stocks don’t give this return nor would all properties! Only those who had selected their stock and land pickings carefully would have reaped a good return in the above lines!

But generally various comparative studies acknowledge the fact the stock market gives the best rate of return over long periods, among all asset classes. Obviously one needs good knowledge and perseverance to stay invested in stock market. It can cut both ways.

Same way beyond one’s dwelling, if one were to hold landed assets, that requires lot of ability to ensure quality tenants, ability to get the possession of the same as and when required and avoid encroachments.

So the higher returns from these classes of assets come with a ‘price’ and they demand ‘active efforts’ as noted above.

Ordinary mortals like the author are happy not investing in stocks or real estate assets and thus not having to worry on the returns and the issues that go with these!

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