The time horizon is a critical factor in assessing prospective profits while investing. Knowing which asset class has historically produced the highest returns can be instructive for individuals looking at a 15-year period. Indian stocks do not lead the pack during this particular time period, despite what the general public believes.
The FundsIndia Wealth Conversation Report states that during the previous 15 years, Indian equities, a popular choice among investors, have demonstrated an annualized return of 13.2%. Although this is great, during the same period, Indian equities have underperformed compared to the US markets, as represented by the S&P 500, which has had an annualized return of 18.7%.
US stocks have undoubtedly been the best performer, yielding the largest returns. Although they trail equities, other asset classes such as debt funds, real estate, and gold also play important roles in diversified portfolios. Often seen as a safe-haven investment, gold has produced a mediocre 10.6% return. In spite of its long-term growth reputation, real estate yielded a 6.4% return. The NHB Residex is used to compute real estate returns for five cities between December 2002 and December 2008, and for fifteen cities between December 2008 and March 2024.
Finally, 7.5% was the return offered by debt funds, which are seen as lesser risk. It's interesting to see that the performance dynamics change significantly as we increase the time horizon to 20 years. The greatest performer is Indian stocks, which have produced an impressive 16.1% annualized return. The 13.9% return on the US equity market indicates robust long-term growth. Gold has also performed exceptionally well over the past 20 years, outpacing the returns from debt funds (7.4%) and real estate (8.4%). The 20-year analysis demonstrates the long-term promise of Indian equities, while the 15-year timeframe prioritizes US equities.
This variation emphasizes how crucial it is to take economic cycles and the investment horizon into account when making financial plans. In order to make well-informed decisions that are specific to their financial goals, investors should evaluate their risk tolerance and long-term objectives. In the end, the contrast between a 15-year and a 20-year time horizon highlights how volatile the financial markets are.
Long-term leaders may be Indian equities, but don't discount shorter-term prospects in other asset classes, such as US equities. Direct investments in foreign stocks are also possible, as are mutual funds. Direct investment can be expensive since currency conversion fees are incurred during both the purchase and sale processes. Using mutual funds to invest is a more straightforward and easy option. To reach their financial objectives, investors must regularly assess their portfolios, taking into account both past performance and potential for the future.
