wonder of gold
In terms of annual compound returns in the long run, investing in gold has outperformed most other investment options. On one hand, Indian equity gave a compound annual return of 13.5 percent in 20 years. At the same time, gold prices increased by 15 percent during this period. Whereas, real estate gave a CAGR of 7.8 percent and debt also gave a return of only 7.6 percent.
According to the FundsIndia study, the 13.5 per cent CAGR return from Indian equities over 20 years was lower than the 14.8 per cent CAGR return given by US equities measured in rupee terms by the S&P 500 TRI. Investing in gold has outperformed most investment options in terms of compound annual returns over the long term, shows a note from FundsIndia.
While Indian equities gave compound annual returns of 13.5 percent in 20 years, gold gained 15 percent during this period. According to the FundsIndia study, real estate with a CAGR of 7.8 percent and debt with a CAGR of 7.6 percent were at the bottom in this ranking.
The data shows that Indian equities’ return of 13.5 per cent in rupee terms over 20 years was lower than the 14.8 per cent CAGR return delivered by US equities measured in rupee terms by the S&P 500 TRI. G Chokkalingam, founder and research head of Equinomics Research, says that the demand for gold has increased due to increased purchases by central banks around the world, due to which the prices have remained high. He said that apart from this, in the last few years, amidst the big-scale Central Bank policies, increasing tensions in the world, weakening of Rupee and high prices in the stock market, the attractiveness of gold as a safe investment for common investors has never diminished.
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Miracle of gold in 5 years
According to FundsIndia report, the CAGR return from gold in a short period of 5 years was 23.2 percent, which was better than 16.5 percent of Indian equities and 19.6 percent of US equities. Despite the excellent returns, experts believe that there is scope for further increase in gold prices in the coming year, mainly due to the increase in buying of safe investments as tensions are increasing in the world.
He believes that other factors driving the price of gold higher include problems in mining, which leads to lower production and reduced supply, while demand remains high. Rick Kanda, managing director of UK-based The Gold Bullion Company, said it is estimated that by the end of 2026, gold could go up to $5,000 per troy ounce. It is expected that the central banks of the world will maintain the pace of their gold purchases, which will be important in taking gold to the level of $5,000. “Gold will continue to rise, especially if the current inflation and uncertainty persists.”
Mid, smallcaps outperformed
According to a FundsIndia report, in the domestic equity segment, the 20-year CAGR returns from mid- and small-caps stood at 16.5 percent (Nifty Midcap 150 TRI) and 14.3 percent (Nifty Smallcap 250 TRI), respectively, which was higher than 13.8 percent for large-caps (Nifty 100 TRI). Chokkalingam said that in the last 10 years, there has been a sea change in how and where Indian common investors invest their money, with most people preferring mid- and small-cap segments for quick earnings.
G Chokkalingam further said that 10 years ago the number of retail investors was around 66.5 crore, which has now increased to more than 20 crore. Most investors invest in the small- and mid-cap universe for quick earnings. Additionally, economic growth over the past few years has also helped companies in both these segments outperform their large-cap peers, leading to better market returns in small and midcaps.