Good Ole Debt!

These days,equity investors are laughing their way to the bank because Sensex has generated 44% returns during the past one year. While the benchmark index has generated this return, there are several stocks that have risen by more than 100% during the same period.So, it’s natural for investors to get carried away when Dalal Street is on a roll, and the Sensex is making a habit of hitting record highs almost every other day. Suddenly, retail investors are flocking back to the market if inflows into equity schemes and the number of demat accounts opened recently are any indication.But here lies the catch: retail investors who are entering the ring now may not get the kind of returns from equities as seen in the recent past.

In some instances, it also doesn’t make much sense being a long-term investor in equities. A look at the Sensex returns chart in the past 20 years could be a bit disappointing even for a hard-core investor. The Sensex closed at 4,588 in August 1994 and despite being at a lifetime high of 26,420 now, it has only generated a mediocre annualised return of 9.15% during this 20-year holding period. Several debt products, like the Public Provident Fund (PPF), have generated better annualised returns of 10.46% in this period. Read more of this post