Stocks vs. Gold vs. Real Estate: Which Investment Truly Builds Wealth Over 20 Years?
The FundsIndia Wealth Conversations (August 2025) report offers a comprehensive comparison of equity, debt, gold, and real estate over long periods, highlighting the best wealth-building strategies.
EquitiesReal EstateGoldLongterm InvestmentWealth CreationReal EstateAug 17, 2025
By looking at 10-year, 15-year, and 20-year returns, the report shows how wealth has grown across different investment options and highlights the risks that investors must understand.
The numbers as of 31 July 2025 show that equities and gold have been the strongest performers in the past twenty years. Indian equity, measured by the Nifty 50 TRI, gave a 20-year compounded annual return of 14 per cent. This means that money invested in 2005 has multiplied 13.7 times by 2025.
The US equity market, represented by the S&P 500 in rupee terms, has done slightly better with a 20-year return of 14.6 per cent, multiplying investments 15.3 times. Gold in rupee terms has performed almost the same, compounding at 14.7 per cent over 20 years and multiplying money 15.5 times.
Debt investments, tracked using low-duration and corporate bond funds, delivered far lower growth. Over 20 years, debt grew at 7.6 per cent annually, multiplying money only 4.3 times. Real estate returns were similarly weak, with a 20-year CAGR of 7.7 per cent and a multiplication of 4.4 times.
Even over shorter horizons like ten years, equities compounded at 12.6 per cent compared with 7.2 per cent for debt and 5.2 per cent for real estate. These figures clearly show that equities have been the best way to create wealth over long periods, while debt and real estate have lagged well behind inflation-adjusted returns.
The report shows that since July 1990, Indian equities have delivered an average annual return of 13.6 per cent. Over these 35 years, money has multiplied nearly 89 times. But these gains came alongside heavy short-term volatility. For example, the dotcom crash in 2000 saw the Sensex fall by 56 per cent, the global financial crisis in 2008 cut markets by 61 per cent, and the COVID-19 pandemic in 2020 caused a 38 per cent drop. Yet, recovery after each crash came within one to three years.
Looking at rolling returns since 1999, the Nifty 50 TRI shows that over any 7 years, there has never been a negative return. The lowest 7-year return was 5 per cent annually, while the average remained close to 14 per cent. 84 per cent of the time, 7-year returns were above 10 per cent. Over ten years, 80 per cent of the time investments tripled in value, and over twelve to thirteen years, three out of four times investments grew fourfold.
This long-term data proves that patient investors benefit, while those focused on short-term declines often lose confidence too early.
The Nifty Midcap 150 TRI has compounded at 16.9 per cent over 20 years and multiplied money 22.8 times. The Nifty Smallcap 250 TRI has delivered 15.3 per cent annually over 20 years, multiplying money 17.2 times. These numbers are much higher than the 14.2 per cent return from the Nifty 500 TRI over the same period.
Over the past fifteen years, midcaps returned 16.3 per cent per year and small caps 13.9 per cent, compared to 12.3 per cent from large caps. However, the drawdowns in these segments are sharper. Since 2004, small caps have fallen more than 30 per cent from their peaks nearly 40 per cent of the time. During the 2008 crisis, smallcaps lost 77 per cent of their value, taking more than seven years to recover.
Midcaps also saw a 70 per cent fall in 2008 but recovered in under three years. Despite these steep corrections, the long-term results are positive, with midcaps delivering a 19.6 per cent CAGR since 2003 and smallcaps giving a 14.3 per cent CAGR since 2004.
A direct comparison with inflation shows equities are the most reliable wealth creator. Since 2000, equities have outperformed inflation by an average of 7 to 9 per cent annually. Against debt, equities have outperformed by 6 to 8 per cent, which highlights that fixed-income assets preserve money but do not grow wealth meaningfully.
Over 15 to 20 years, equities also outperformed gold by 2 to 3 per cent annually, even though gold had very strong years like 2020 and 2024. Compared to real estate, equities outperformed by 5 to 6 per cent annually. These figures confirm that equities are not only capable of protecting against inflation but also of growing wealth much faster than other asset classes.
The report highlights the risk of trying to time the market. If an investor had put Rs 10 lakh in Nifty 50 TRI (Total Return Index) in 1999 and stayed invested until 2025, the value would have grown to Rs 2.97 crore, a CAGR of 13.9 per cent. But if the investor had missed just the 15 best days in the market, the final value would have been only Rs 1.34 crore, cutting the CAGR down to 10.5 per cent.
Missing 30 of the best days would reduce the wealth further to just Rs 45 lakh. Importantly, seven of the ten best days in the market occurred within two weeks of the ten worst days, showing that exits during market crashes usually mean missing the strongest rebounds.
Frequently Asked Questions
What is the best long-term investment according to the report?
According to the report, equities have been the best long-term investment, providing the highest compounded annual returns over 20 years.
How do midcap and smallcap stocks perform compared to large caps?
Midcap and smallcap stocks generally offer higher returns but come with higher risk. Over 20 years, midcaps have compounded at 16.9 per cent and smallcaps at 15.3 per cent, compared to 14 per cent for large caps.
What are the risks of market timing?
Market timing can significantly reduce returns. Missing just the 15 best days in the market can cut the CAGR from 13.9 per cent to 10.5 per cent, and missing 30 of the best days can reduce the final value to just Rs 45 lakh.
How does real estate compare to equities in terms of returns?
Real estate has lagged behind equities in terms of returns. Over 20 years, real estate delivered a 7.7 per cent CAGR, while equities delivered a 14 per cent CAGR.
What role does inflation play in investment returns?
Inflation plays a crucial role in investment returns. Equities have outperformed inflation by an average of 7 to 9 per cent annually since 2000, making them a reliable wealth creator.
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