Investment as a word has intrigued quite a lot of us. It helps to put our money into work and generate higher returns over time allowing our funds to increase in value. There are plenty of us who want to invest in the market but hold them due to the fear and reservations, the major of those fears are titled towards the stock market.
If you look at the investment scene, India and its people have directly or indirectly been part of the investment for long. There are plenty of traditional options like fixed deposits, gold, real estate and more where a user has vested their interest and been putting their funds into. These investment options have been around for long yet when it comes to returns they are well short of the stock market returns. This is where the conundrum lies; people have an inherent interest in the equity market but are bogged down with the fears and myths.
The major fears around the equity market are that they are riskier and you’re more likely to lose out the money rather than gain from it. People often deem it to gambling and also describe the stock market as only for those who have a large pool of money, which is nothing but a myth in itself. It is a well-accepted fact that even though the market is dynamic and ever-changing, the returns offered by equity is unmatched when it comes to investing in India. The same is backed down by stats of which we’ll describe further down below. Read along.
Which Investment Product has given the Best Return so far?
Investment is vital for anyone who wants to put their savings into work and generate a larger corpus in the long run for their goals and needs. All of us tend to have short term and long term financial goals and the only way to achieve them is through managing and investing the money in a proper way where you get the best returns. We here take a look at the equity market and compare it with the other counterparts in the market to see if they are really the ones with the best returns so far.
Investment into equities is about buying shares of publicly listed companies. These shares are traded on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). We talked about the traditional investment options like fixed deposits, gold, real estate and more above and how they are the ones that people opt for. The equity market has a greater potential for returns in comparison to these but they are often put down due to the myths.
Comparison of Equity Market Returns with other Investment Options
However, historically the returns from the equity market have been way better than any other investment option. They have offered a return of 14%-15% CAGR (Compound Annual Growth Rate) over the past 15 years. If you were to look closely into the equity returns over the last decade and more, there are plenty of Indian companies that have offered multifold returns over time and have been the talk of the town. These overwhelming multifold returns are not possible with other investment options like fixed deposits, bonds, mutual funds, and gold.
When we talk of other investment options, the major names in the Indian investment scene are fixed deposits, gold, and mutual funds. We here look at the historical returns offered by all these options and compare them to the one offered by the equity market.
Fixed deposit started out as 8%-9% during 2010 but now has gone down a notch to 5%-7% in the present day. Putting this into context, the net returns after taking into consideration the inflation aspect of 3%-4% and taxation, it amounts to a mere 4%. Even though it is a risk-free investment, the returns seem very poor to opt for.
As for the mutual funds, historical stats suggest that mutual funds have offered a 10%-12% CAGR on an average. Although some of the high-risk mutual funds have offered in the range of 16% CAGR returns, they tend to go around in the average range for most of the time. These tend to be better options than investment schemes like fixed deposit, gold, and other options but come up short of the equity market by quite a lot.
Historically gold has offered a CAGR return of 8% over the last 20 years. This return ranks somewhat similar to the returns of the fixed deposits but tanks completely when it comes to the range offered by direct equities.
When you pit the returns offered by equity to those of fixed deposits and others, the final corpus at the end of the investment doesn’t tend to be as fancier as you’d want it for. Add the aspects of inflation and taxation, then the net returns seem pretty poor for the aforementioned investment options in comparison to equity.
Final Words
There are plenty of investment options in the market offered with different levels of return and risk metrics. A person can select the best investment option based on their suitability. There are plenty of factors that affect the investment and any individual willing to invest would likely go through these choices like risk metrics, budget and more before opting for one.
Note: All information & data provided in this article is for the educational purpose as well as to give general information on the investment and wealth management, not to provide any professional advice or service. Views & opinions are not biased against the company and do not affect any official policy or any other agency, an organization within the content.