Four investment products that didn’t deliver in the last decade

It is important to understand whether or not your investments are aligned with your financial goals (Mint)

It is not always easy to talk someone out of investing in real estate. The pushback comes in the form of stories handed down by family or friends of making superlative returns by selling property. According to the 2017 report from the household finance committee of the Reserve Bank of India (RBI), the average Indian household had 84% of its wealth in real estate and other physical goods, 11% in gold and just 5% in financial assets. Even investments like cryptocurrencies gathered followers, partly through stories of individuals who got into them early and made huge profits.

But following the herd has three risks. First, you don’t understand the investment product and the cycles it follows. So you may have seen supercharged returns from an asset, but may be unaware of how the value of the same asset erodes during other times. Second, you run the risk of putting all your eggs in one basket and miss out on the benefits of diversification. Third, your investments may not be in line with your goals.

It is, therefore, important to understand whether or not your investments are aligned with your financial goals. To help you assess your portfolio, we show the not-so-rosy side of some products that are popular among investors but failed to deliver in the last decade.

Real estate

Historically, real estate has accounted for the lion’s share of Indian investors’ money, especially among the older generation. According to Vineet Iyer, co-founder of Wealth Creators Financial Advisors, a financial planning firm, older investors have a much larger share of their wealth in real estate compared to the younger generation; the older generation’s average ticket size while buying property is also much larger.

However, large holdings in real estate make little sense given the dismal returns compared to other investment products in the market. Data from Anarock Property Consultants Pvt. Ltd for seven major cities reveals that property prices have grown by just 4.3% (compounded annual growth rate) since 2009. Even if you add a rental yield of 2-3%, the figure does not improve much.

“A lot of investors have fared badly in real estate, particularly with under-construction properties which didn’t get delivered on time. In some cases, clients asked me to find buyers so that they could exit,” said Deepali Sen, founder partner, Srujan Financial Advisors LLP, a financial planning firm.

The effect of demonetisation worsened returns from the already stretched real estate market, said Rajat Sharma, founder, Sana Securities, a financial advisory firm. “The turning point for the real estate market was the 2008 financial crisiswhen investors rushed to exit. Demonetisation further slowed prices since people cut down on the use of unaccounted money in real estate deals,” he said.

Also, it is important to see how and when you can use the returns from real estate to fund your financial goals. “Investors need to align their investment with the goal they have in mind. For example, I have a client who owns multiple properties but was unable to sell any of them in time to fund his child’s foreign education,” said Suresh Sadagopan, founder, Ladder7 Financial Advisories, a financial planning firm.


Gold earns no dividend, rent or interest and has no inherent growth potential and yet is considered a safe investment. This is because investment in gold stems from fear. People see it as a refuge from galloping inflation and volatile equity markets. Both these factors caused gold to peak in 2011. Since then, the yellow metal has been virtually stagnant. Gold has a 10-year return of 6.47% and a five-year return of just 0.35%, as on 15 March 2019. “I do not recommend gold as an investment. Why a metal like gold should give returns simply by sitting in the cupboard is not obvious,” said Sharma.

People often overspend on jewellery with the justification that gold is also an investment, completely neglecting costs such as making charges. While you can have some exposure to gold, it should not be more than 5% of your portfolio.


Bitcoin was the star investment of 2017.The virtual currency started the year at around 66,000 per unit and peaked on 15 December to 12.6 lakh, a leap of about 19 times. This was a success story many found hard to ignore. The crash that followed was equally sharp. Bitcoin fell to 6 lakh by the start of February 2018 and the regulators who were sitting on the fence about its legality decided to clamp down on it. RBI banned banks from enabling any transactions related to bitcoin in April 2018, leaving thousands of investors stranded with an asset they simply couldn’t sell.

“I would say cryptocurrency was the biggest wealth destroyer of the past few years. People have made losses in the order of 50-70% and due to the RBI restrictions, they cannot liquidate the balance amount either. In many cases, investors took personal loans to invest in cryptocurrency,” said Vijay Raj Singh, a Pune-based mutual fund distributor and wealth manager.

Cryptomania was a classic case where herd mentality can do more harm than good. For the record, bitcoin has been trading in the range of 2.5-3 lakh per unit since the start of 2019.

Flavour-of-the-day MFs

Investment in equity through the mutual fund route has emerged as the most viable option for long-term investors. However, reckless investment in mutual funds can cause your wealth to nosedive.

For instance, infrastructure funds gained popularity in 2007-08, pharma funds in 2015 and mid- and small-cap funds in 2017. “Several investors piled into mid- and small-cap funds between January 2017 and January 2018 looking at recent returns. However, the succeeding year proved disappointing and many investors are simply waiting to exit the moment their portfolios edge back into the green,” said Mahesh Mirpuri, a Chennai-based mutual fund distributor. As of 25 March 2019, the one-year average return for mid-cap funds is -2.6% and for small-cap funds is -9.21%.

“Balanced fund investors also entered these funds in droves after demonetization on the expectation of regular income through dividends. Such investors have been sorely disappointed,” said Mirpuri. This is because balanced funds were wrongly marketed by some distributors as avenues for getting fixed income. Balanced funds returned -2.3% in calendar year 2018 after giving a stellar 27.5% in calendar year 2017. Deposit rates with banks and financial institutions fell significantly after demonetization as large deposits of cash entered the banking system, pushing several fixed income investors into mutual funds.

Mint take

Investment decisions must be driven by goals and ability to take risk. Diversification is also essential. Sometimes, investors ignore these principles, piling into ‘hot’ assets like cryptocurrency or sector funds. Other investors repeat the mistakes of their parents, putting all their money in real estate and gold simply because their parents did so. This is when investment failures occur, as history reminds us time again—from the tulips of 17th century Netherlands to the cryptocurrency bubble of 2017.


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