Long-term Sources of Investment Returns

sources-of-invest
  • U.S. equities have generated a total return of 8.9% p.a. over the last 130 years.

  • During this period, there were extended periods when real investment returns were negative.

  • This return is comprised of four components, namely multiple expansion, inflation, real earnings growth, and dividends.

  • Multiple expansion over the long-term is small enough that it can be ignored as a source of investment return.

  • Over the long-term, price appreciation returns earned from investing in equities, i.e., returns excluding dividends, approximately equals business value growth.

  • A simple process that successfully identifies businesses that have the sustainable ability to grow their business values at above average rates will generate superior investment returns.

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Baijnath Ramraika

About The Author

Baijnath Ramraika, 36, is an MBA from the Darden Graduate School of Business, University of Virginia, is a CFA charter holder, and is also a Chartered Accountant from The Institute of Chartered Accountants of India. Baijnath is a partner at Multi-Act Equiglobe (MAEG) and is a Sr. Portfolio Manager at Multi-Act.


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Portfolio Management Services (SEBI Registration No. INP000002965) are offered through Multi-Act Equity Consultancy Private Limited (CIN: U67120PN1993PTC074692), which is a wholly-owned subsidiary of Multi-Act Trade and Investments Private Limited; Investment Advisory Services (SEBI Registration No. INA000008589) are offered through Multi-Act Trade and Investments Private Limited (CIN: U65920MH1997PTC109513).