Either people do not understand or do not want to apply common sense….so some investment myths continue. Let me list some of the emails that I have received recently….

1. ‘What ever you say about Gold, NO OTHER ASSET CLASS has given the kind of return that gold has given in the last 40 years’:

Vow! will people use excel sheets before they make such claims please? Then look at the returns that you could have got from Wipro, and let us exchange notes please. If you think Wipro is an unfair example (on a metals basis, gold is a poor pick!) compare gold return to the return on the sensex (growth option – reinvestment of dividends) and then we can comment. Fair?

2. Other than gold it is only prime land which has given such good returns NO OTHER ASSET CLASS: Check 40 years return on a flat in Santacruz, Ghatkopar, Defence Colony, Green Park, Besant Nagar, Adayar, among the metros – compare it to the sensex returns…over 31 years!

3. In a market like this, which is falling, it is better to invest in debt instruments which give 13.5% return over the next 5 years: If inflation is about 10% and you are sure it will remain there over the next 5 years, you are getting a NEGATIVE RETURN if you invest in a debt product! Well I have no way of making sure whether it will continue to fall. People should use the words like increasing and decreasing very carefully. What has happened and what will happen maybe different….

 

 

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  1. Eh, don’t think example 3 is right? If inflation is 10% and one can find debt with 13.5% returns, that’s a real return of +3.5%, no?

  2. vick,
    Debt return of 13.5% post tax will be approximately 9.25% only and with inflation @ 10% , Real rate of return is negative.

    Raghav

  3. yes Vick, but subject to tax..and rising inflation have to be considered. 13.5% – and 30% tax is net 9%…and if inflation goes up even a lil bit..you are in -ve territory. Equity is tax free, well as of now at least 🙂

  4. Sanket your comment is unfortunately, a reflection of the quality of the readers…because Subra says..these are the emails that he has received from READERS! HA ha..

  5. 80-90% of people talk about investing in gold when it is at its peak. Similar was the case in real estate, shares…
    Maybe it is human mentality.

  6. No comments on the usefulness of the article, just a small personal experience. THis week some one who has had a investment in real estate in a distant suburb of Mumbai was advised to retain it.300% increase in price so far. Reason to stay invested is a ‘reputed luxury’ builder had announced a project in the vicinity and the price he was asking when discounted for age and brand name would potentially give over 700% return! This from an investment advisor.God bless Deepak Parekh.

  7. It is a *very wise* article. *Best Wisdom* i have seen is often said in few lines as this. Whoever finds it N/A for them need not read it. Doesnt mean others dont want it. Subra, my day starts with reading your post, and i and other readers have got practically *infinitely rich wisdom* reading this more than any other source, so please write anything you feel.

  8. Sir , one query , why return in debt product is calculated
    assuming person is in highest tax slab , if he is in lower slab
    then real return in +ve.

  9. Useful or Useless No Single reader can decide.If anyone finds Subra is adding article just for the sake of addition She /He should not waste time in checking .For many readers like me ,its enlightment .Subra Remember Gavaskars Words…No Need to touch every wide ball going outside Off stump ? Many thx for your Value Add Articles

  10. what suresh wrote made me thinking.. return of 700% on his real estate investment. If i were to put the sum in an index fund or for that matter even in a well managed active fund won’t it take me atleast a decade and half to multiply my money by a factor of 7!!!

  11. real funny happenings in real estate in Mumbai. One builder borrowed a huge amt of money for a LONG PERIOD of time at 28%p.a.

    to me no BUSINESS is sustainable at these rates of LONG TERM BORROWING…but prices are not dropping…quire confusing..

  12. Dear subra Sir,

    Is it possible to redue the period from 30 years to 15 years and see how the returns, equity,gold&real estate.

  13. Amit, the question is how do you define sale? There has been a sale in the Japanese stock market for the last 20 years or atleast a decade (depending on your reference point).

  14. Dr Mohammed Ali Khan

    Gold & Real estate are mostly inflation hedges rather than investments per se ( which in a world with no central banks & a gold based monetary system, inflation hedges will be mostly unnecessary.)

    Its not wise to confuse them with investments like shares or education.

  15. without inflation,the price of real estate should really go down.
    if productivity increased the ease of building and made it more avaiable to people,it should decrease the cost of housing.second,shouldnt depreciating assets cost less once used?

    only because land is not a free market and is subject to insane regulations -not to mention the inflation caused by the money printers-is it any asset at all.otherwise it is just an expense.

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