Best place to invest in 2013

by Manshu on December 31, 2012

in Opinion

Over the weekend I read Venture Capitalist Brad Feld’s post Ignore Trends and Predictions and thought it was great advice for not only VC investors but others as well.

This is the time when you will see a slew of articles on what to do in 2013, the best places to invest etc. and while all these are well meaning and have some utility in terms of what new products have been introduced in recent years, what has been doing well etc., there isn’t much more to this beyond that .

This is what Brad Feld has to say:

Every year, at this time, I get a flurry of requests for my “predictions for 2013” or “exciting, hot, new trends for 2013 that I’m looking at.”

I respond with “I don’t care about trends and my only prediction is that one day I will die.”

This is usually not a particularly satisfying response to whomever sent me the request. One of two things happen: They either ignore my response and drop me from their prediction request list for whatever article they are writing. Alternatively, they press a little further, usually with something like “c’mon, you’re a venture capitalist — you must have an opinion about what is going to be hot next year.”

Actually, I don’t. I have never been a short term investor, and I don’t think entrepreneurs should be short term thinkers. Creating a company is really hard and it almost always takes a long time. Sure, there are occasional short term success stories — companies founded two years ago that get bought for $1 billion, but these are rarities. Black swans. Things you don’t see in nature and can’t count on.

In an Indian context – it is easy to see how this is applicable. In November last year, I did a post along the same lines (Read: Which is the best place to invest?) in which I compared returns on stock, gold and fixed deposits for the past five years, and showed how differently each asset class behaved every year, and how it was virtually impossible to predict what will happen in the next year.

I have updated the chart with data for 2012, and here’s what it looks like now.

Gold Nifty and FD Returns for the past 6 years

For anyone who remembers how the sentiment was last year, you would remember how nobody said this is the year to buy stocks and certainly no one predicted that stocks will do twice as well as gold in 2012.

Most of the times our prediction about the future is just that it will be more of the past and that is seldom right. The good news however is that you don’t need to make predictions or be right every year, as long as you are right long term with your goals and asset allocation.

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{ 12 comments… read them below or add one }

Brett Wilson December 31, 2012 at 9:13 am

I personally believe that Chinese stocks will be the best performing assests in 2013. U.S. and European equities will also likely perform well in 2013, but Chinese ones will outperform them because they are at multi year lows.

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Manshu December 31, 2012 at 9:57 am

Why Chinese?

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Naresh December 31, 2012 at 9:44 am

agreed, just keep investing for the long run not being bothered of the predictions and hopefully we will be able to beat inflation over a long period of time. Moderate the expectations and we have a formula to have investing success

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Manshu December 31, 2012 at 10:01 am

What’s the formula in your opinion?

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Karan Batra December 31, 2012 at 10:04 am

With the world economies starting to recover from the slowdown, I personally feel that Stock Markets would outperform Gold this year.

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Manshu December 31, 2012 at 10:11 am

Just curious if if you remember your prediction from last year?

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Abhishek Pandey December 31, 2012 at 10:54 am

Rightly said, nobody can predict the best investment avenue in the start of year. I think these financial assets, most of them, are just crap, a crazy game that we all need to play to beat inflation, to pass time or earn our breads, whatever :-). You want to be rich, another wants to make you rich by his predictions based on biased facts :-). I just feel pity for those fools who look for predictions. Oooch..why did I read your blog? Thank god, you saved me.

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Manshu December 31, 2012 at 11:41 pm

LOL good one!

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Dr. K January 1, 2013 at 1:49 am

Nicely put. It’s essential to balance out so much noise we get from TV and magazines on investment avenues, with such a rather philosophical post :) I think even though we all realize we are yet to meet someone in real life who has actually made all the great money following some simple advice on TV or a book, we still subconsciously like to believe some of this “advice” too seriously. A nice wake-up-call kind of post that served as a good reality check. Good job, Manshu!

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kartavi January 1, 2013 at 10:35 pm

Another fact-telling post. Great.

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Keshav Tripathi January 2, 2013 at 2:34 am

All these money business channels leave one with the feeling that yet another day has passed without one having madeany money while others made it! The more ‘expert’ advice one listens to, the more top 10 performers count downs one watches, the more bewildered one gets! At such times pages like yours work as reality check and keep one’s feet firmly planted on to the ground.

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Mike January 2, 2013 at 2:40 am

I couldn’t agree more! First of all, a long term investor has more options like investing in dividend paying stocks, active investments, zero coupon bonds etc. In addition, long term investments are hedged against short-term movements in the market that are greatly affected by exogenous factors.

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