Gold Outperforms Equities and Real Estate with 15% Annual Return Over 20 Years: Report

A FundsIndia report has revealed that gold has delivered a 15% annualized return over the past 20 years, outperforming Indian equities, real estate, and debt. This significant performance underscores gold's role as a stable and reliable investment.

The report indicates that real estate returned 7.8% and debt delivered 7.6% over the same period, with Indian equities’ 20-year return trailing at 13.5% as per Nifty 50 returns. In comparison, US equities, as per the S&P 500 returns, delivered a 14.8% return over the same period.

Over a shorter five-year period, gold’s performance was even more robust, with a five-year CAGR of 23.2%, outpacing Indian equities at 16.5% and US equities at 19.6%. Mid- and small-cap stocks also outperformed large caps over 20 years, with the Nifty Midcap 150 total return index at 16.5% and the Nifty Smallcap 250 TRI at 14.3%, compared to 13.8% for the Nifty 100 TRI. Mid and small cap stocks exhibit higher volatility but also strong long-term compounding, with midcaps delivering a 19.6% CAGR over 22 years.

Analysts attribute gold’s rise to several factors, including central bank buying, safe-haven demand amid aggressive central bank policies, geopolitical concerns, a softening rupee, and high equity valuations. These factors have collectively contributed to gold's strong and consistent performance.

The report also highlights that debt markets remain steady, offering 7-8% long-term returns, which reaffirms their role as shock absorbers in investment portfolios. Market corrections of 10-20% occur almost every year, but 75-80% of years still end positively, reinforcing that volatility is temporary while growth is permanent. Large declines in the stock market, often over 30%, historically recover within 1-3 years, followed by strong upside movements.

A recent report from HSBC Global Investment Research suggests that a double-digit return from Indian equities is likely next year if policy measures revive consumption and a favorable regulatory regime is in place.

In summary, gold's consistent and strong performance over the past two decades makes it a compelling investment option, particularly in volatile market conditions. While equities and real estate have their merits, the stability and reliability of gold cannot be overlooked.