Experts and veteran investors tend to underscore the significance of equity assets by putting across the rationale that their returns invariably outpace those of debt and gold in the long run. A recently-released report also brings home this oft-repeated point, albeit with fresh evidence and data.
Let us explore more on this. This report states that Nifty 50 TRI (Total Return Index) gave an annualised return of 13.2 percent in the past 10 years, whereas gold and debt during the same period gave a CAGR (compound annual growth rate) return of 7.4 percent.
FundsIndia’s Wealth Conversations (May) examines the returns delivered by equity, debt, gold and debt in the past several years and decades.
In the past 20 years, the broader market benchmark index (Nifty 50) gave an annualised return of 17.5 percent, while the corresponding returns of gold and debt during the same period are 12.3 percent and 7.2 percent, respectively, the report shows further.
The index returns in the past 32.5 years were 13.5 percent. This means index multiplied 64 times during the past over three decades.
Across the market capitalisation
Upon comparing the long-term returns of stocks across the market capitalisation, the report concluded that the mid cap stocks, on an average, gave higher returns than their large cap and small cap counterparts.
In the past 10 years, mid-caps (Nifty Mid-cap 150) gave 18.5 percent annualised returns. During the same period, large caps (Nifty 50) have 13.2 percent annualised returns and small caps (Nifty Small Cap 250) gave 16.3 percent annualised returns.
| Market capitalisation | 10-year- CAGR returns (%) |
| Large cap | 13.2 |
| Mid cap | 18.5 |
| Small cap | 16.3 |
(Source: Wealth Conversations; Nifty index returns as on Apr 30, 2023)
The same trend was observed in the past 15 years as well.
The mid-caps gave 13.1 percent annualised returns whereas the large caps and small caps gave 10 percent and 9.8 percent annualised returns, respectively, the report shows.
The report also came up with another interesting observation. The longer the time frame, higher are the odds of better returns.
In the past 10 years, the percentage of instances of returns to be higher than 10 percent is 82, whereas this percentage declines to 72 in five years, 65 in 3 years and 56 in one year.
