The Indian stock markets have given the highest returns compared to any other asset class over the past decade, according to a new study.
According to a recent study, the Indian stock markets have given the highest returns compared to any other asset class over the past decade, provided you adopted a long term approach.
The research conducted, by value-based investment firm, FAMS analyzed long term investments in real estate, stock markets, commodities, Mutual Funds, art and ULIPS over the past decade.
According to the findings stock markets outperformed other assets classes on an average by 60%. The outperformance in certain cases was as high as 3000%. For instance an investment in Bank of India's FD (Fixed Deposit) would have given you a return of around 8% per year, while on the other hand investing in Bank of India's stock would have given you a return of around 3300% from 2001 to 2007. The stock rose from Rs. 12 to Rs. 410 in that period.
The study further added that the high returns and transparency due to electronic systems have attracted several new investors both local and international; over two lakh new Demat accounts are opened every month. There is a potential for this number to easily double or even triple in coming years.
Speaking about the research, Yogesh Chabria, investor and bestselling author said, "The irony is that even though stock markets as a long term asset class have given the highest returns, short term trading in futures and options has also caused the maximum losses. Our study showed that the maximum numbers of bankruptcies were caused during to the stock market crash in 2008-2009 amongst high risk speculative traders."
Indians continue to be underinvested and less than 3% of the Indian population directly invests in stocks. The main reasons for this is a lack of knowledge, awareness as well as unethical practices by a small minority of participants who encourage regular churning based on tips and rumours.
"The study proves that investing in the stock market can be profitable if you have knowledge, experience and above all patience on your side," Chabria added.