Four charts to help you avoid big asset allocation mistakes
BSE Sensex over a five-year period. Note the outperformance of the NASADAQ. Now, if I took a 10-year time frame the outperformance almost goes away.
But you still benefit from the depreciation of the rupee (which is not captured in the chart above; if you did that the outperformance of the NASDAQ would be a lot more for instance). International investing, however, is complex and requires a deep understanding of global markets. If you're up for it, or can find alternative routes like ETFs investing in international stocks, it's worth considering - but proceed with caution.
The fourth and final point is about real estate, often a misunderstood asset class. Data from FRED on Indian residential property returns between 2009 and 2014 indicates potential lucrative opportunities in this sector. Note that these are just part of the returns from the last upcycle in Indian residential real estate, which began in around 2005-06.
As this shows, residential real estate can be a lucrative investment opportunity as well. You see, just like with any other investment, you need to pick your real estate investment destination well. And then be sure to buy when it is very attractively priced – the last such opportunity was perhaps in 2020 and 2021, at the peak of the pandemic.
Having said that, real estate might not suit everyone due to its substantial initial investment requirements and the choice between land, residential, or commercial properties. Yet, for those who can manage a real estate portfolio, it's an avenue worth exploring, despite its detractors. In summary, these four insights - moderation in small and midcap investments, including gold, considering international diversification, and exploring real estate - are intended to
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