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.

About Multi-Act

Multi-Act was founded in 1997 by two Wharton graduates, to develop an Equity Research capability for their own investments. Today, we employ 50 people who operate out of our offices in Mumbai and Pune and service a range of clients from wealthy families, family business owners to sophisticated investors and capital intermediaries around the globe.

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