Stocks out­per­form gold and oil

The Pak Banker - - NATIONAL -

Save for the year 2008, which was a night­mare for the in­vestors in both oil and stocks as each plum­meted by 58pc, eq­ui­ties out­per­formed re­turns on other as­set class in the past 10 years.

Av­er­age re­turn from stocks stands at 25pc dur­ing the decade, in­clud­ing a re­turn of 27pc in the pre­vi­ous year.

Oil ( US bench­mark WTI) could have fol­lowed as the sec­ond best in­vest­ment but for the dip in prices by 42pc in 2014. Over­all, oil in­vestors re­ceived a re­turn of 12pc in the 10-year pe­riod.

In un­cer­tain times, risk ad­verse in­vestors usu­ally seek safety of the fixed in­come or tan­gi­ble as­sets. Gold, widely re­garded to be in­vest­ment of choice for the long term, pro­vided re­turns be­tween 12pc in 2005 and 42pc in 2009, giv­ing an av­er­age re­turn of 18pc in the last decade.

But gold too buck­led un­der pres­sure of sup­ply over de­mand to end up with neg­a­tive re­turns of 20pc in 2013 and 5pc in 2014. As for T-bills, the 10year av­er­age re­turn was 10pc, twice the miserly re­turn of 5pc given out by banks in the same pe­riod.

Yet, in­vest­ment in T-bills is pre­ferred mostly by banks, fi­nan­cial in­sti­tu­tions and high-net-worth in­di­vid­u­als. For all the ef­forts of the reg­u­la­tors, small saver would not touch T-bills, which to them is still shrouded in mys­tery.

But in­vestors do some­times fall in love with the dol­lar; those who did it in 2007 were lucky for hav­ing re­ceived 22pc in re­turn. But as the ru­pee over­pow­ered the dol­lar for the first time in 10 years in 2014, in­vestors in the green­back stood with neg­a­tive re­turns of 4pc. Over the pre­vi­ous 10 years, av­er­age yearly re­turn on the dol­lar works out at 6pc.

An­a­lysts at bro­ker­age Topline Se­cu­ri­ties men­tioned in a re­port that the dol­lar's de­pre­ci­a­tion against the ru­pee in 2014 could be at­trib­uted to sig­nif­i­cant in­crease in for­eign ex­change re­serves, pro­ceeds from pri­vati­sa­tion; auc­tion of 3G and 4G spec­trum li­cences and Eurobond is­sue, which re­sulted in am­ple sup­ply of dol­lar.

Re­turn on prop­erty is as dif­fi­cult to judge as it is to work out its real value. In a re­port, an­a­lysts at Topline Se­cu­ri­ties men­tion: "Ac­cord­ing to a survey con­ducted by (an on­line prop­erty por­tal), real es­tate in­vest­ment in se­lec­tive lo­cal­i­ties yielded a re­turn of 25pc in 2014".

Topline men­tions that gold prices dropped by 5pc last year due to rapidly chang­ing geopo­lit­i­cal and eco­nomic sce­nar­ios. "In­vestors use gold as a hedge against in­fla­tion, how­ever, low in­fla­tion rates and ex­pected hike in in­ter­est rates by US Fed in 2015 have kept prices un­der pres­sure," the bro­ker­age stated. Since in­fla­tion dur­ing 2014 clocked in at 7pc, the in­fla­tion­ad­justed re­turn from stocks stood at 20pc. Over the 10 years, in­fla­tion­ad­justed re­turns on stocks worked out at 14pc.

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