Which Asset Class Delivered Best Results In Last 10 Years?

 

 While not decisive, asset class performance over several years can help shortlist the best available investment options

Investing is essential for wealth creation and maintaining long-term financial well-being. However, many people are not sure exactly where to invest their money. One approach investors can use is to look at the performance of various asset classes over a specific time frame. Let us check out what the numbers say.

Equity investments - Annualized return on equity investment is around 12% to 13%. If we look at Nifty 50 TRI (Total Return Index), the returns over a 10-year period are 13.3% CAGR. Nifty 50 TRI is a stock market index, considered as the benchmark for Indian equities. It tracks the performance of top 50 companies that are traded on the National Stock Exchange (NSE). Also important to note that Nifty Midcap 150 and Nifty Smallcap 250 have returns of 16% and 13.23%, respectively. This is better than many large-cap stocks. However, midcap and smallcap have higher volatility.

Overseas Equity (U.S. Equities) - It is possible for Indian citizens to invest in U.S. equities. Most of the India-based brokers have specialized tools such as overseas trading accounts for investment in U.S. stocks. Investors can also open an overseas trading account with a foreign broker. As per RBI guidelines, the Liberalized Revenue Scheme (LRS) allows Indians to invest up to 2.50 lakh US dollars per year. Data reveals the U.S. equities have annualized returns of 11% to 12%. Over a 10-year period, the S&P 500 TRI delivered returns of 16.4% CAGR. Adjusting for currency value fluctuations, the return is around 11-12%.

Gold - Over a 10-year period, gold has delivered returns of 7.5% CAGR. The returns have been as high as 10.6% in specific years. As of now, gold is appreciating at a high rate due to geopolitical uncertainties. Many experts predict that gold will rise further in the coming years.

Debt / Fixed Income - These have annualized returns of 6–7%. Return over a 5-year period was 6–6.5% CAGR for debt funds and fixed-income securities and around 7% over a 10-year period. These asset classes are preferred owing to their low risk and stable earnings.

Real Estate - Investment in real estate has fetched around 4.8% CAGR over a 10-year period. This is based on NHB Residex data for major cities. If you are wondering why returns are relatively lower for real estate, it is due to lower liquidity and high transaction costs.

What about return on cryptocurrency (Bitcoin)? - It is possible that Bitcoin may have fetched the highest returns among all asset classes. Some estimates indicate exceptional returns on Bitcoin, around 600%, during the period from 2014 to 2023. However, since this asset class has seen wide fluctuations, it is not included in the primary list. Cryptocurrency like Bitcoin is for ‘high risk, high profit’ players. It is not recommended for the average investor.

source :newspatrolling