A year for all asset classes

The Indian investor would have generated healthy portfolio gains this year; with no asset class acting as a drag on the other.

The year witnessed a rise in valuations across asset classes such as equities, gold and realty.

If 2008 was a year when most asset classes failed to perform, 2009 was one when almost every popular asset class provided an opportunity to build wealth. Be it equities, debt, gold or real estate, the Indian investor would have generated healthy portfolio gains this year; with no asset class acting as a drag on the other.

Surprised? Well, here's how you would have made a quick buck by just staying invested round the year, across asset classes.

Debt for all seasons

Take the simple time-tested debt option; fixed deposits with banks. Looking back, you would be surprised to know that these fixed return investment havens lured investors with interest rates as high as 12 per cent in end of 2008. Of course, the beginning of any lucrative offer or rally is often overlooked.

Even if you had been a late entrant and missed the 12 per cent rates, locking in to fixed deposits in January 2009 would have still guaranteed an 11 per cent interest rate.

Missed the bus there and watched bank interest rates sadly dwindle? Never mind, a series of non-convertible debentures issued by companies such as Tata Capital, Shriram Transport Finance and L&T Finance at various time periods between February and August offered interest rates between 10 and 12 per cent. It's not just the interest rates that made these offers noteworthy. These non-convertible debentures (NCDs) are traded in the stock exchanges and can be sold anytime.

Take the case of Tata Capital NCD offered in February. It currently trades 22 per cent above its offer price. A rather neat return from a debt option.

And as if that was not enough, corporate deposits – tagged risky in the initial part of the year given the high leverage of their underlying companies – soon provided comfort with improving financials. Interest rates of 9-12 per cent offered (and still on offer) by many creditworthy finance companies such as Sundaram Finance or Mahindra Finance followed by a number of corporates ensured that investors were not short of good debt options for most part of the year.

Debt mutual funds too, played their part well in ensuring that investors were not disappointed.

Rich, richer …

If debt was not exactly your idea of building wealth, then let's move on the most-loved and at times the most-hated asset class – equities.

Returns of 120 per cent from the March lows would only have been a dream for many as few could have timed their entry in to equities in March, given the undercurrent of pessimism then. However, even if you had waited a while and invested sometime during May (when mutual funds too derived conviction to move fully in equities from their deep cash positions), chances are that you would have made a neat returns of about 50 per cent (returns generated by the broad market index CNX 500, during this period). And had you taken the mutual fund route, your returns could have been much higher.

Real opportunity

Not often do you get a real deal – when a reasonable property price and low home loan rates are offered at the same time. Well, 2009 is one such year.

While it would be hard to generalise, property prices were available at a bargain beginning February and extending up to June-July. To enable you to purchase at bargains, interest rates offered by banks also dipped to as low as 8 per cent (and still remains so). However, property prices, especially in the middle income offerings, were not available at discounts for too long as select areas across cities witnessed appreciation.

Between June and September alone capital values of residential properties in key cities such as Mumbai, Gurgaon and select parts of Chennai and Bangalore have seen a rise of between 10 and 25 per cent. Had you been among the smart investors who bought a property before June, you may already be sitting on substantial gains.

Not just property prices, homes loans with interest rates kept fixed for 3-5 years at 8-9 per cent could certainly be called some deal. And to think, a home loan would have cost you as much as 12 per cent a year ago. If that does not make an impact sample the difference in terms of EMI: A Rs 20-lakh, 15-year home loan at 12 per cent would have resulted in an EMI of about Rs 23,000 a month. At 8 per cent, there is a drastic reduction by Rs 4,000 a month to Rs 19,000.

The gold rush

Besides debt, if there was one asset class that endowed multiple opportunities to earn returns in 2009, it would have to be gold. Had you invested in gold (through exchange-traded funds) as early as January, this asset class would have yielded a good 20 per cent profit. Had you delayed your purchase to, say, June, the returns would have been 10 per cent – not too lucrative but nevertheless attractive for a safe asset class like gold that does not always generate returns that beat inflation.

So 2009 would certainly go down in history as one of those singular years where every asset class held by you added to your portfolio wealth; that is only if you had invested those cash holdings in to some of these options.

Source: http://www.thehindubusinessline.com/iw/2009/12/27/stories/2009122751081100.htm