When Markets Gyrate, Discipline Pays Off
Did you know that over the past 30 years, the annual compounding return on real estate in locations like Hyderpora and Lal Bazar has been an impressive 18.80%? This means that an investment of approximately 1.5 lakh rupees in 1993 would be worth over 2 crore rupees today. This incredible return highlights the potential of long-term investments in land, but it also emphasizes the importance of patience and discipline in the financial market.
It is often observed that investors in mutual funds tend to lose patience during market fluctuations or downturns. This lack of discipline can lead to panic selling or hasty decisions, ultimately resulting in missed opportunities for long-term growth. In contrast, the historical returns of land over the past 30 years demonstrate the power of compounding and the significance of holding onto investments for extended periods.
While the returns from real estate over the past 30 years have been remarkable, it is essential to maintain a realistic outlook. It is unlikely that the same level of returns will be sustained over the next 30 years. A simple calculation shows that for an investment to grow from 2 crore rupees to 400 crore rupees over the next 30 years, it would require an unattainable 175 times return. This highlights the importance of managing expectations and understanding the limitations of future growth potential.
On the other hand, it is important to acknowledge the potential of other investment options. For example, since 2013, equity-linked mutual funds like the Parag Parikh Flexi Cap Mutual Fund have outperformed gold by a significant margin, with a return of +441.78% compared to gold's +101.67%. This indicates that with the right approach and a long-term vision, equity mutual funds have the potential to deliver strong returns.
The key takeaway from these observations is the importance of patience, discipline, and long-term vision in investment decisions. It is crucial for investors to withstand market volatility and remain committed to their long-term investment strategies. Instead of panicking during market downturns, investors should consider taking advantage of the lower prices to accumulate quality equity mutual funds for future growth.
In conclusion, the historical returns of real estate and the recent performance of equity mutual funds both underscore the importance of a long-term investment approach. By maintaining discipline and patience, investors can position themselves for potential growth and success in the uncertain and fluctuating financial markets.