Stocks vs Gold vs Real Estate: India’s Top Wealth Builder Over 20 Years

fast Summary

• Performance of Investment Options:

– Equities (nifty 50 TRI) delivered a 20-year CAGR of 14%, multiplying investments by 13.7 times. US equities (S&P 500 in rupee terms) slightly outperformed at a CAGR of 14.6%. Gold compounded at a similar rate of 14.7%.
– Debt and real estate showed weaker growth, with CAGRs around ~7.6-7.7% over the same period, multiplying wealth by ~4 times.

• Short-term Returns:

– Over the last decade, equities gave an annualized return of ~12.6%, notably outperforming debt (7.2%) and real estate (5.2%).

• Long-term Benefits & Volatility:

– Indian equities averaged annual returns of ~13% as July 1990, growing investments nearly 89x in total over this span, despite periodic market crashes such as those in the early ’00s dotcom bust (-56%) or COVID-19 (-38%). Rebounds typically occurred within three years.

• Smallcap/Midcap Performances & risks:

– Midcaps achieved higher long-term returns with a CAGR ranging from ~16 to nearly ~20%, but crashes like that during the global financial crisis resulted in steep declines (~70-77%), requiring several years to recover.

• Market Timing Risks:

– Missing just the top-performing days drastically reduces overall gains; e.g., missing only 15 best market days as 1999 slashed potential equity portfolio gains significantly.

Indian Opinion Analysis

The report underscores India’s equity markets as leading drivers for long-term wealth generation when compared to other assets like debt,gold,or real estate-though patience and tolerance for volatility are crucial prerequisites for investors aiming to achieve high returns.

Equity’s ability to consistently outperform inflation speaks volumes about its value as both an inflation hedge and superior compounding vehicle over generations, critical attributes considering India’s socio-economic preferences toward maintaining purchasing power and wealth preservation within family structures across turbulent decades economically globally..

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