Beating the Golden Returns:

Gold has always been close to “Indian” heart. Interest in Gold turned very positive when gold started appreciating aggressively since 2008. With global uncertainties receeding, gold price has been cooling down. 

Thanks to the import duty by Indian Government, gold has been holding up artificially. With possibilities of this import duty being reversed, many ‘investors’ are waiting in sidelines to buy the yellow metal for potential future gains.

No doubt, Gold has appreciated 238 times since 1961. Yes - an archived newspaper article dated 1-Feb-1961 says gold price was Rs.94 per sovereign. Since one Sovereign equals 8 grams, price per gram was Rs.11.75 per gram of gold. Today the price is Rs.2800. That is  a 238 times appreciation! That is the attraction for many investors.

But here is the reality !!!

1961 to 2014, in 53 years gold has appreciated from Rs.11.75 to Rs.2800. That’s a 10.88% return. That’s an average kind of appreciation.

For instance at 12%, the same Rs.11.75 would have grown to Rs.4770 over the same 53 years. At 18% , it would have grown to Rs.75,000. And at 24% compound interest, the Rs.11.75 would have  grown to Rs.10 Lakh plus !!! That's the power of compounding.

Investors need to understand :

• Every extra percentage earned and compounded over long term grows exponentially.

• No meaning in remaining ultra conservative by adding to gold portfolio.

• If you aim at 18% return, over 53 years, your investment would have grown 6452 times (Rs.11.75 Vs Rs.75820)

• And at 24% it would have grown 89402 times(Rs.11.75 Vs Rs.10,50,478).

• Warren buffet’s investment portfolio has compounded at 18%.

Though this may seem simple, the real challenge here could be :

• Invest without risking your capital.

• Reinvesting the entire returns over long period.

• Reinvesting consistently at given rate of returns over longer term.

In a nut shell, if you keep investing even at 12% to 15% kind of returns, you would beat the 'Golden' returns!!!

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