Equity or Gold, the debate as to which is a better investment option, amongst the two, is unending.
If one were to analyse the returns generated by these two asset classes over the past five years, those of the yellow metal clearly outshine gains made by Nifty
by hefty margins. In absolute terms, the prices of the yellow metal
have risen almost 200% from Jan 2008 till date while Nifty has generated
-8% during this period.
As 2008 was one of the worst years for the equity markets
that were crushed under the impact of the financial crisis, one may
very well consider the period starting from the recovery year of 2009
till date as the period to assess the performance of these two asset
classes. But here again, with over 136% absolute gains, gold has outperformed the Nifty returns of over 90% during this period.
However, this trend, despite being in favour of gold, does not construe that yellow metal is a better asset class than equities
at all times.
In the current calendar year, 2012, for instance, Nifty's 22% returns
from January till date are better than 17% gains clocked in by the
yellow metal. Similarly, for the calendar year 2009 alone, which marked a
fantastic recovery for equity markets, Nifty, with 75% returns had
outpaced 24% returns generated by gold.
Thus, while gold should
and will undoubtedly remain one of the most preferred asset classes for
investment, it would be imprudent to completely ignore equities from
one's portfolio. Equity markets, which have lagged for quite some time,
will in fact be equally quick to turnaround with the first visible signs
of recovery in the global economy, whenever that happens.
A prudent investor will thus do well to allocate savings to both gold as well as equity to maximise gains from investments.
