WHY ’10X IN 20 YEARS’ ISN’T AS IMPRESSIVE AS YOU THINK: UNDERSTANDING REAL RETURNS

Let’s be honest: who doesn’t love a good ‘my property multiplied tenfold’ story? Whether it’s your uncle bragging about a flat in Andheri bought for peanuts in the 90s or a friend telling you how their parents’ land now costs a fortune, these stories are like urban legends. They sound incredible. But here’s the twist- when you break them down to annual returns, the numbers aren’t always that jaw-dropping.

A bungalow on Nepean Sea Road in South Mumbai was reportedly bought for Rs. 1 lakh in 1917. It’s now being sold for a staggering Rs. 400 crores. Sounds like a blockbuster investment, right? Forty thousand times in a hundred years! Except when you run the math, the annualized return (XIRR) comes out to just around 11.3%.

Now, 11.3% annually over a century is still a solid return. But it puts things into perspective, doesn’t it?

THE GLAMOUR OF MULTIPLIERS VS. THE REALITY OF XIRR

One of the biggest misconceptions in investing, is evaluating an asset’s performance purely based on how many times it has grown. A ‘10x return in 25 years’ sounds like a dream. But when converted into annualized returns, it’s around 9.6%.

Compare this with a mutual fund that delivered 15% annual returns over 20 years. That’s roughly a 16x wealth multiplier. But because we’re so conditioned to think in multiples, we don’t realize the power of compounding.

WHY XIRR MATTERS

XIRR (Extended Internal Rate of Return) tells you how much your investment grew per year, factoring in the effect of compounding. It brings all asset classes on the same level playing field. Whether it’s gold, equity, real estate or FDs, XIRR helps compare equally. When we rely on multipliers without context, we ignore time, which is arguably the most important variable in wealth creation.

Here’s a simple rule: Always look at returns in annualized terms.

REAL ESTATE vs OTHER ASSETS

Historical data gives us a fair idea of what to expect in the long run. Real estate, though often talked about as the ultimate wealth builder, actually falls behind equity in terms of long-term annualized returns.

Of course, every asset has its purpose and place. Real estate gives you a tangible asset, rental income and even emotional satisfaction. But from a pure returns standpoint, equity wins.

WHY PEOPLE STILL LOVE REAL ESTATE

Because it’s visible, touchable, and for many, it’s a legacy. Unlike stocks and mutual funds, a piece of land or a flat feels ‘real.’ It also often benefits from leverage- you might put 20% down and take a loan for the rest, so any price appreciation feels bigger.

But remember, leverage is a double-edged sword. It can magnify gains and losses.

Also, real estate transactions come with hidden costs: stamp duty, registration fees, maintenance, taxes, brokerage, legal fees and lack of liquidity. All of these eat into your net returns, but are rarely accounted for in those shiny ‘10x’ claims.

EQUITY: THE UNSUNG HERO

In contrast, equity tends to be underrated outside the finance-savvy circles. But data doesn’t lie. The Sensex, Nifty, and good mutual fund schemes have consistently delivered 12-15% over long periods. The key is discipline and patience.

You don’t need to time the market, flip stocks, or chase the next big IPO. A well-constructed equity portfolio, held over 15-20 years, quietly builds serious wealth.

Plus, it’s easy to track, easy to exit and low on transaction costs. You can start with as little as Rs. 500. No builder delays, no tenants, no legal disputes.

CONCLUSION

Every asset class comes with pros and cons. What matters is understanding your financial goals, time horizon, and risk appetite.

If you’re looking for long-term growth, equity should be a core part of your portfolio. If you want income and diversification, add real estate. Just don’t fall for the 10x or 40,000x stories without doing the math.

Next time someone tells you about their blockbuster investment, whip out your XIRR calculator and ask, ‘But what’s the annualized return?’

You’ll be surprised how often the glamour wears off.