Is buying a property still the best investment option?

Investment decisions are one of the most difficult & critical moves of your lifetime. Diversifying your portfolio in different asset class is indeed a big challenge. Based on the data available for the last 15 years across Gold, property, equities and Fixed deposit, it is quite visible that the riskiest asset class 'Equity' has topped the table over 15 year period. My observations are as follows:

• If you want to invest for one year or less, then Fixed deposit is the right asset class for you. Gold, property and equity are long term instruments where realisation of returns takes some time
• From FY13-15, Fixed depoits have given better returns than property. Does it worth revisiting the old school debate between buying vs renting a house or Whether property is an asset or a liability. Hope the 15 years return table enlighten us!
• Equity, considered to be the riskiest and highest rewarding asset class has topped the league table

Categorisation of different types of investment ideas

• Slow Growers – aging companies growing slightly faster than GDP. Usually bought for their dividends and buybacks.
• Stalwarts – large quality companies that are profitable and are growing slightly faster than slow growers.
• Cyclicals – A company whose sales and profits rise and fall in a regular if not completely predictable fashion.
• Fast Growers – Small, aggressive new enterprises growing at 20-25% per year
• Turnarounds – Battered bruised and possibly in or facing bankruptcy. The performance of these stocks is largely uncorrelated with the broad market.
• Asset Plays –A company that’s sitting on something valuable that the market has overlooked, for example real estate

- Peter Lynch - Author of One up on the Wall Street

How Americans spend their money?

• Housing leads the table as expected
• Clothing is declining (maybe because of outsourcing to Asian countries), Healthcare and Education expenses are rising
• Money spent on alcohol is one of the most stable categories
• Money spent on reading has slowly declined over time - Because social media takes most of our free time.
• 1973 must have been a party year for everyone as recreation and entertainment expenses went on to some another level :)

What led to the returns in the Indian stock market during 13-16?

Well, in most cases your returns on a particular stocks is driven by three factors (broadly)

1. Growth in earnings

2. Expansion of multiple

3. Dividend

By looking at this data, the majority of the returns during 2013-16 is driven by Multiple expansion which is primarily a proxy of consumer sentiments. Now the question is whether the bull run in the stock market is sustainable, given the weak growth in the corporate earnings growth?

Poor Man's Guide - Howard Marks

Howard Marks has beautifully made a clear distinction between Bull vs Bear market indicators!