THE REAL STORY OF MONEY MARKET.
Film actor Rajesh Khanna bought a bungalow in iconic Carter Road in Mumbai for Rs.3.5 lakhs in 1970. His heirs sold it recently for Rs.85 crores. The property has multiplied by 2428 times or an annualized return of 19.38% over 44 years.
Samudhra Mahal in Mumbai is another expensive property. A flat purchased in 1970 at Rs.700 per sq.ft was sold at Rs.1,18,000 per sq.ft in 2013. Money multiplied by 168 times in 43 years. This works out to an annualized return of 12.66%
In 1963, Godrej paid Rs.1 lakh to buy his first house, a 2916 sq.feet apartment at Usha Kiran, Carmicheal road, in tony South Mumbai. In 2011 he sold it for Rs.25 crore. Money multiplied by 2500 times over 48 years or an annualized return of 17.70%
In Dalal Street, Mumbai a sq.feet was Rs.100 in 1980. After 34 years, it sells at Rs.27,000 per sq.ft. Money multiplied by 270 times in 33 years. This works out to an annualized return of 17.90%.
The first three properties can be bought and owned by cream or elite of the society who are worth at least tens of crores, mostly hundreds of crores.
The last property in Dalal street; your father could have bought with whatever money available at his disposal. You can buy it even now. Your son or daughter would be able to buy it even 20 years down the line.
The last property is Sensex. A sq.feet is a metaphor for one unit. If dividend yield is also included (assuming 2% CAGR), Sensex would have delivered 20% annualized returns over last 34 years, higher than the most expensive prime properties in the country.
Good mutual funds and many stocks have delivered returns far superior to Sensex itself.
Power of equity is least understood in this country.
If you can withstand notional loss (if you don’t book) in portfolio during bear markets, not worry about daily price movements, it is possible to make much better money than what can be made out of best of real estate.
Give at least the same importance to equity as you give to real estate.
You don’t mind holding real estate for 20 or 30 years. Please do the same for equity ignoring bull and bear markets, notional profits and losses.
Many of you have been investing for last couple of years. Stay the course for at least another 15 to 20 years completely ignoring market fluctuations. You would be amazed at the fortune created for your retirement or to pass on to your children.
Must read….for those who love equity and for those who hate equity…..
THE ABOVE ANYSIS IS AN EXAMPLE OF MODERN-DAY FINANCIAL COUNSELLING AND/OR INVESTMENT ADVISORY !
I DO NOT DISAGREE WITH THE INVESTMENT HOMILY DELIVERED ABOVE … CERTAINLY NOT IN THE SENSE IN WHICH THE COMMON INDIVIDUAL RETAIL INVESTOR UNDERSTANDS IT AND IS BEING PERSUADED, IN FACT, TO ACT UPON IT… BUT MORE RATHER IN A PLATONIC SENSE, I DISAGREE WITH IT PROFOUNDLY.
My disagreement rests upon the fine distinction I believe there is to be made … and I fully realise it might seem very unrealistic, even bizarre one to many Finance-savvy persons … between popular investment advisory and unpopular wisdom advisory
And here below I give my reasons for whatever they are worth :
1. The real story here, to my humble understanding, is that we are all being asked to stay invested in INFLATION rather than in REAL VALUE . That’s the irony of modern financial wisdom … that we call it wisdom at all ! Our investment strategies are becoming increasingly dictated by an almost monomaniac focus on simply staying ahead of or out-beating Inflation …. Nothing more , nothing less.
2. I’ve reached a stage in my life when I’m convinced that the only value-investing worth investing for the long-term is Knowledge or investing in intellectual capital or Education in the best sense of the word … not the commercialised, rat-racing for-profit, jobs-targeted university-degree education that is invested in today across the world by governments, public institutions and private charities .
3. Few of us make investment decisions other than on the criterium of Returns. The highest returns are in fact from investment-avenues that have the highest probability of growth in tandem with general inflation and it is very distinct from true value-accretion. What we are all fed with as Investment Advisory (to be read as Advocacy) today is intended really to thus lull, if not fool us into believing that our wealth is growing and flourishing and that our investments decisions were great and smart decisions.
4. In the portfolio of even the most successful , the biggest investment companies in the world , you will be surprised to know that the allocation or outlay for knowledge or research-based investments is just a fraction of the investment appetite for other merely profit-driven, ROI-based, inflation-hedged investments in non-knowledge-based, consumer-pandering asset classes.
Sudarshan Madabushi