#10yearchallenge

#10yearchallenge – A comparison between investment options

What is LKR 1,000,000 invested in 2009 worth Now?

Hashtag 10year challenge (#10yearchallenge) is storming the social media, Started couple of days ago, it is a challenge to post your 2009 profile picture alongside your 2019 profile picture, meme creators and stroll page owners are having a really good time and we thought why not use the same trend to analyze the performance of various investment options.

This content is primarily focused on the value growth and we ignored the inflation and related factors to keep it simple, here is the value of LKR 1,000,000 invested 10 years ago.

LKR 1,000,000 invested in USD

The trading currency of most of the nations and Srilanka faced approx. 16% loss against USD last year alone (2018), we have two scenarios to compare, 1 USD was at 113.88 LKR in 2009

#10yearchallenge

Scenario 1

Converted LKR 1,000,000 to USD 8,781.173 and kept it in your locker, no interest earned and only appreciation attributed to the growth, the current value of USD 8,781.173 will be LKR 1,597,647 which is only 59.76% growth over 10 years, Averaging around 5.97% per annum

Related: Depreciating rupee, what are the opportunities we have?

Scenario 2

Converted to LKR 1,000,000 to USD 8,781.173 and invested in foreign currency fixed deposit with an average 3.5% return, interest paid annually and compounded to the capital.

 Year   Capital   Interest   Total – end of the year 
2009  $                         8,781.17  $      307.34  $                             9,088.51
2010  $                         9,088.51  $      318.10  $                             9,406.61
2011  $                         9,406.61  $      329.23  $                             9,735.84
2012  $                         9,735.84  $      340.75  $                          10,076.60
2013  $                      10,076.60  $      352.68  $                          10,429.28
2014  $                      10,429.28  $      365.02  $                          10,794.30
2015  $                      10,794.30  $      377.80  $                          11,172.10
2016  $                      11,172.10  $      391.02  $                          11,563.13
2017  $                      11,563.13  $      404.71  $                          11,967.84
2018  $                      11,967.84  $      418.87  $                          12,386.71
2019  $                      12,386.71    

The investment maturity value as of 2019 will be USD 12,386.71, investment value in LKR will be 2,253,638.336, which is 125.36 % growth over 10 years’ time and averaging around 12.53 % Per annum.

LKR 1,000,000 invested in Fixed Deposit

Foreign currency deposit is not everyone’s baby and most of us used to local currency fixed deposits, at a rate of 13.5% interest, interest paid annually and compounded to the capital. Please note, that during the period interest rate went down to 7-8 % and went up to 16-17%, thus we calculated at an average of 13.5%.

 Year   Capital   Interest   Total – end of the year 
2009                           1,000,000        135,000                               1,135,000
2010                           1,135,000        153,225                               1,288,225
2011                           1,288,225        173,910                               1,462,135
2012                           1,462,135        197,388                               1,659,524
2013                           1,659,524        224,036                               1,883,559
2014                           1,883,559        254,281                               2,137,840
2015                           2,137,840        288,608                               2,426,448
2016                           2,426,448        327,571                               2,754,019
2017                           2,754,019        371,793                               3,125,811
2018                           3,125,811        421,985                               3,547,796
2019                           3,547,796                                 

Your LKR 1,000,000 will be LKR 3,547,796, which is approx. 255% growth over 10 years, averaging at 25.5% per annum.

LKR 1,000,000 invested in Gold

You could have bought 327.3 Gram gold at the rate of LKR 3,054.38 per Gram (40.92 sovereigns at LKR 24,435.04 per sovereign). At the current rate of LKR 7,545.01, your gold is worth LKR 2,468,916.76

#10yearchallenge

146.89% growth over 10 years, averaging at approx. 14.68 % per annum.

Data Source: https://goldprice.org/spot-gold.html

LKR 1,000,000 invested in Stocks

We have selected four major and strong companies of CSE for the analysis, this analysis excludes the dividend paid by the companies during the period, only the price movement taken into the account.

Allocation

John Keels holdings (JKH.N0000)             – LKR 250,000

LOLC (LOLC.N0000)                                       – LKR 250,000

Commercial Bank (COMB.N0000)             – LKR 250,000

Dialog Axiata (Dial.N0000)                          – LKR 250,000

Company Per Share Price in 2009 Invested amount (LKR) No of share Per Share Price in 2019 Investment Value in 2019 10-year growth YOY Average
LOLC 16                      250,000.00                    15,625.00 88.5      1,382,812.50               453.13             45.31
JKH 40                      250,000.00                       6,250.00 154.5         965,625.00               286.25             28.63
Com Bank 30                      250,000.00                       8,333.33 114.5         954,166.67               281.67             28.17
Dialog 5.75                      250,000.00                    43,478.26 10         434,782.61                  73.91               7.39
                     1,000,000.00          3,737,386.78               273.74             27.37

Your LKR 1,000,000 will be LKR 3,737,386.78, as a percentage 273.74% growth over 10 years, averaging 27.37% per annum.

Data source: Ft.com

LKR 1,000,000 invested in Land

We couldn’t find a source for the historical land prices and luckily we met a person who bought land in Dehiwala, just out of Colombo demarcation and inside the western province, according to him, he bought a plot of land in 2009 for approx. 10 Million, which is a 10 perch land. And currently the land price around the same location is in between 4 – 5 Million per perch, let’s take an average of LKR 4,500,000 per perch.

Related: Real Estate Investment – Investing for the future – Chapter 07

Considering the price appreciation, LKR 1,000,000 is equivalent to LKR 4,500,000, which is approx. 440% over 10 years, averaging at 44% per annum. again, we have not considered the rental income during the period and considered only the price appreciation.

Conclusion

#10yearchallenge reveals that the real estate/ land investment is the best out of other options, however our analysis subject to market risks and other controlling elements.

Investment Option Investment amount in 2009 Investment value in 2019 Growth % Average Per Annum
USD – Scenario 1 LKR 1,000,000 LKR 1,597,647 59.76% 5.97%
USD – Scenario 2 LKR 1,000,000 LKR 2,253,638.3 125.36% 12.53%
Fixed Deposit LKR 1,000,000 LKR 3,547,796 255% 25.50%
Gold LKR 1,000,000 LKR 2,468,916.76 146.89% 14.68%
Share Market LKR 1,000,000 LKR 3,737,386.78 273.74% 27.37%
Land LKR 1,000,000 LKR 4,500,000 440% 44%

Disclaimer: Srilankan average point to point inflation stands at 9.47% from 1986 until 2018, this is not taken into consideration, and mentioned rates are average returns during the consideration period, past performance of stocks and land prices should not be taken as future guaranteed returns and all the investments are subject to market risks.

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