{"id":7819,"date":"2021-01-27T10:00:35","date_gmt":"2021-01-27T04:30:35","guid":{"rendered":"https:\/\/gtm360.com\/blog\/?p=7819"},"modified":"2025-10-21T16:25:38","modified_gmt":"2025-10-21T10:55:38","slug":"bombay-stock-exchange-or-bombay-real-estate","status":"publish","type":"post","link":"https:\/\/gtm360.com\/blog\/2021\/01\/27\/bombay-stock-exchange-or-bombay-real-estate\/","title":{"rendered":"Bombay Stock Exchange or Bombay Real Estate?"},"content":{"rendered":"

Sensex recently hit 50,000. The index of the thirty biggest Indian companies by market capitalization listed in Bombay Stock Exchange has appreciated 50X in the last 30 years: From 1,000 on 27 July 1990<\/strong> to 50,000 on 21 January 2021<\/strong>.<\/p>\n

The only other asset class that comes to mind with similar – or even higher – multiple than 50X is Bombay Real Estate.<\/p>\n

So I asked myself, which was the better investment between Bombay Stock Exchange<\/em><\/strong> and Bombay Real Estate<\/strong><\/em> in the last 30 years? This blog post is the result.<\/p>\n

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Given below is a comparison of returns from Sensex with those from a few Bombay Real Estate transactions I’ve heard about in the last 30 years or more:<\/p>\n

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*: Cf. online calculator at CAGR Formula & Table<\/a>.<\/p>\n

As you can see from the above table, the annualized returns of Sensex during the 30 year period is 13.68%.<\/p>\n

Bombay Real Estate A1 has beaten it. A2 and A3 have come close to it. A4 has trailed it by a mile. (JFYI, the 10 year CAGR of Bitcoin is 167%, click here<\/strong><\/a> for more.)<\/p>\n

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\"\"<\/a>To me, the most striking difference between Bombay Real Estate<\/em> and Bombay Stock Exchange<\/em> is that, you could get similar returns by investing in any random property in Bombay whereas you couldn’t realize the 13.68% annualized return by investing in Sensex.<\/p>\n

That’s because you couldn’t invest in Sensex<\/strong><\/em> in the first place.<\/p>\n

While the layperson thinks that Sensex is representative of the overall equity asset class, it’s not. Nor is it some scrip that you can go out and buy.<\/p>\n

Sensex is an index comprising a basket of 30 scrips where the scrips keep changing all the time<\/em>. As testimony, only five out of the 30 stocks in Sensex in 1990 are there in it today.<\/p>\n

(As an aside, in case anyone still has any doubts, Sensex is most certainly not representative of the overall economy.)<\/p>\n

As I highlighted in Equity Always Underperforms Fixed Deposits<\/a>, stock picking and timing decide equity alpha. Without the right combination of these two factors, your stock portfolio may well have trailed Fixed Deposits, let alone Bombay Real Estate.<\/p>\n

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Ergo Bombay Real Estate<\/em> is a more homogeneous asset class compared to Bombay Stock Exchange<\/em>.<\/p>\n

Not surprisingly, many of us have heard about people who have actually gained the aforementioned kind of appreciation in Bombay Real Estate but I strongly doubt if any of us has heard of anyone who plonked in INR 1,000 in Sensex in 1990 and took out INR 50,000 last week (I haven’t).<\/p>\n

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Stock market punters might point to ETFs to counter my contention that Bombay Stock Exchange is not as homogeneous as Bombay Real Estate. For the uninitiated, ETF is a low-cost, passive Exchange Traded Fund that tracks the index. If a stock enters the Sensex, the ETF buys it. If a stock leaves the Sensex, the ETF sells it. Period.<\/p>\n

While they’re not wrong, I’d like to temper their counterview with my experience of investing in ETFs:<\/p>\n