Any investor who put her money in silver at the start of 2010 would have earned higher returns than those who focused on bonds, stocks, cash, commodities, gold and real estate. The metal delivered higher returns in the year than any of the other major investment classes. With returns of 50 and 70 per cent-plus over the last two years, silver has outperformed the traditional safe-haven metal gold and popular investment papers like stocks and mutual funds. Overall, though, only an extremely lucky investor can boast of being a multi-bagger in 2010.
Exchange-traded funds or growth-oriented equity funds, the safest ways to take exposure to equities, moved with gold, increasing the value of Rs 100 invested a year ago to Rs 122. Even small- and mid-cap stocks, which gave fabulous 100 per cent-plus returns in 2009, just about managed double-digit growth in 2010. Investments in the primary market through public issues averaged 9 per cent returns, significantly lower than Sensex stocks, which offered 15 per cent. This was because only 26 new issues of 66 offerings in 2010 currently quote above their issue prices.
Real estate averaged 13 per cent returns in the major cities, though some smaller cities did better in certain pockets. On the debt side, government bonds and debt funds yielded 8 to 9 per cent returns with interest rates moving upwards from their 2008 and 2009 lows. As for investments in the US dollar, no surprises at a paltry 3 per cent return.
Nevertheless, 2010 proved fruitful for most assets classes. The outlook for 2011, however, is uncertain. The manner in which investors choose to position their portfolios at the start of this year will have a significant impact on their year-end returns. Today, the stock market is looking for direction and gold and silver prices at the current level are at their peaks.
So investors must plan for growth and stability, putting aside the political and financial issues. They must build an equity portfolio to include large-, mid- and small-cap growth and value stocks. With inflation running high, it makes sense to put money into funds with investments in short-duration paper and shift to longer-term maturity paper later. Locking into seven-, 10- or 15-year bonds at attractive rates should also be high on the list.