Earn, Save, Invest that is what we do with respect to handling money. Most of the people dont track the CAGR on their investments. The investment could be Real Estate, Debt instruments, Gold, equity, commercial properties.
Real Estate : We often hear people say my father bought a land in 1980 for 1Lakh and today its 2 crores. Immediately people will conclude long term RE is good investment. You need to tell them though it looks big appreciation but the CAGR is 14.2%
Gold : Some people say gold is a good investment. When you look at 40 years data. Gold has appreciated 38 times, but again the CAGR is 9.5%
Sensex: The index moved from 128 to 40k in this 40 years. If you have invested in index it would have appreciated 310 times with CAGR is 15.4%
In the above most of the investments are not done as business and it was more like passive investing, bought and kept for years and that was your CAGR.
I know people who consider investing as business and will tell you with a recent example. A friend of mine who considers investing only with a business mindset. I can tell you what he did with his equity investments in the recent past
1. When nifty crossed 12K in January 2020, he hedged all the investments against nifty by buying the ATM put option - long term options for Dec 2020. Kept the stocks so that the dividend are intact.
2. The hedging cost was managed by Selling the Call option of the same value in long term options for Dec 2020.
3. When the market started falling he realized that he need to raise more capital and mortgaged his Real Estate and Gold investments and raised 3 crores with a 3 year mind set.
4. When the market came to 8k he sold all the put options and bought back the funded call options.
5. With the money made in options he sold 6000 put option again against long term options Dec 2020.
6. Invested all the three crore capital raised in different stocks, mutual funds and few long positions on nifty.
7. When market crossed 11500 he took back the borrowed capital from the market and plan to close the morgaged loan.
The morgaged loan was targetted for three years but got enough returns for the capital invested so he decided to close the loan and the profits he made is still in market.
Investing with a business mind set allows you to take risk when there are opportunities and when there are opportunities you need to know how you should raise capital. Identifying businesses to double the capital every three years is possible only if you are investing with a business mindset.
Certainly investing should be considered a serious business irrespective of where you invest your money.
