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.
Understandably, they were in vogue at the time. Indian Commercial Real Estate was just coming out of the global financial crisis & FDs being the deep-rooted “Indian Savings of choice”, were the safe haven to go to in times of volatility.
Let’s look at the Data Story.
Given the investment options available in the market, it can get quite tough to decide where to put your money. To make it easier, let's compare some of the most commonly adopted market products like gold, equity, real estate, and fixed deposits (FDs) and see which ones have historically generated the highest returns.
Often considered a safe haven asset that investors turn to during times of economic uncertainty or inflation. This is because it tends to have an inverse relationship with inflation, making it a good hedge against inflation and a diversification option for investors' portfolios.
Over the past 20 years (2000-2022), gold has generated an average annual return of around 13.37%. This return has been higher compared to other traditional investment options like real estate and fixed deposits (FDs), but lower than average return on equity.
Equity or stocks, on the other hand, have historically provided higher returns than other types of investments. Over the past decade, the average annual return on equity has been around 16%, which is significantly higher than the average return of other investment options.
Real estate investments can provide significant returns if done correctly, but they can also be more complicated than other types of investments, due to the lack of liquidity and the need for expertise in finding optimal investment opportunities. Over the past ten years, the average annual return on real estate has been around 12.08%.
Fixed deposits are considered a safe investment option as they provide a fixed rate of return over a specified period. However, they tend to provide lower returns than other types of investments, especially over the long term. Over the past decade, the average annual return on FDs has been around 6-7%
*Note: Returns are not inflation adjusted