Last few years have been a nightmare for all the financial models. And some one needs to do some serious re thinking in terms of all the equations and financial market theories that were considered as holy grail of finance.
One of the worst affected theory could be the long term stock market returns. Many a books preach the fact that over a long term, stock markets always ted to outperform the bonds and other low risk assets. While the theory was all good in 80s and 90s, with US witnessing a secular bull market, it had been left wanting over the past few years. Starting with Japan, then the dot com companies, and now china, most of the long term investors are deep in red. Time for Finance 2.0.
The post crisis world is characterized by easing policies adopted by central banks of all major economies. This is akin to a recession in real terms, even though we may see some growth in notional terms. So, while our salaries may keep rising, because of devaluation of currency, our real purchasing power will keep going down. One of the prime reasons why most financial assets have performed badly in recent times, whereas the real assets continue to do well.
In these markets, real assets may be the best investments. So find something which may be valued in years to come and put your money on it. Be it Gold or Land, or even website addresses, anything which is a real asset and would be used by future generations would be a good bet.
Let me track how Nifty performs vis a vis Gold over the next couple of years. I would tend to think it would underperform.
One of the worst affected theory could be the long term stock market returns. Many a books preach the fact that over a long term, stock markets always ted to outperform the bonds and other low risk assets. While the theory was all good in 80s and 90s, with US witnessing a secular bull market, it had been left wanting over the past few years. Starting with Japan, then the dot com companies, and now china, most of the long term investors are deep in red. Time for Finance 2.0.
The post crisis world is characterized by easing policies adopted by central banks of all major economies. This is akin to a recession in real terms, even though we may see some growth in notional terms. So, while our salaries may keep rising, because of devaluation of currency, our real purchasing power will keep going down. One of the prime reasons why most financial assets have performed badly in recent times, whereas the real assets continue to do well.
In these markets, real assets may be the best investments. So find something which may be valued in years to come and put your money on it. Be it Gold or Land, or even website addresses, anything which is a real asset and would be used by future generations would be a good bet.
Let me track how Nifty performs vis a vis Gold over the next couple of years. I would tend to think it would underperform.
