I have been a follower and investor in equity markets. There is something quite curious about us Indians as investors. An average Indian has significant investments in real estate, gold and fixed deposits but has very little investment in equity (less than 5%). Interestingly, Ultra High Net Worth (U-HNI’s) and High Net Worth (HNI’s) in India have significant exposure to equity, UHNI’s have about 40% in equities and HNI’s have about 17%. Globally, citizens in richer nations have about 30% invested in equities and HNI’s in those countries have much higher exposure to equities (about 40%). Globally progressive individuals and HNI’s have generated and grown wealth by investing in equities.
I believe, there is some merit in investing in real estate and gold. Gold is a good store of value but is not a productive asset and its value may not continue to appreciate, though a certain exposure is required. Real estate in India has done phenomenally well in the last 30 years, expecting a similar trend over the next 30 may not be prudent. Having a good exposure to Real estate is key for any portfolio, but it should be just one part of the portfolio.
India is growing at over 8% per year and good part of the growth is driven by businesses that are providing great services and creating wealth. Top companies, many of them listed on the stock market, are growing at more than 8% per year. We have a very good opportunity to leverage this to create wealth. As the investment in real estate and gold in India represent significant part of the wealth, the opportunities in equities are much more compelling. There is evidence that smart money is already in equities and is moving there at an increasing rate.
I believe that progressive Indians need to have at least 20% of their assets in equities (there is more than enough research to back this up, and we will work to share this as we go along). Equities in the long run (about 10 years) are expected to do phenomenally well, the long term return rate for Nifty is 14%. In the US, capital markets have delivered over 10% annualized returns for about a century now.
I am starting IndusWealth to provide information about various aspects of investing and assist individual investors to benefit from equities. One of the key objectives of this firm will be to help generate long term wealth though prudent investments and preservation of capital, i.e., invest sensibly for the long run and avoid risky get rich quick schemes.
As we start to post content and information, we are looking forward to hearing your views and thoughts.
Praveen Reddy | Principal Advisor