Equity beats gold, PPF, bank FD! Stocks delivered best returns over 40 years

In the last 40 years, equity has outperformed all other asset classes with the BSE Sensex giving a compounded annual growth rate of 13.71 per cent, much higher than gold, silver, public provident fund (PPF) and fixed deposits (FD). A comparison of asset classes from 1981 to 2020 shows that equity assets have given the best returns in the last four decades even though stock markets are considered to be volatile.

There is much less exposure of the general public in stock markets compared to the other asset classes, though in the last few years, it has been growing through the mutual funds route.

Inflation in the last four decades was at 6.52 per cent. Gold, which is considered a safe haven asset, gave a compounded annual growth rate (CAGR) of 8.48 per cent, while the returns offered by another precious commodity, silver, were lower at 6.92 per cent.

Bank fixed deposits, which give assured returns, gave a CAGR of 8.62 per cent which was higher than gold. PPF, used for retirement savings, gave the best returns after equity at 9.41 per cent, but still much lower than equity.

Commenting on the trend, S. Ranganathan, Head of Research at LKP Securities, said, "India`s equity market has always delivered above-the-curve returns compared to other competing asset classes such as metals or fixed income instruments."

Ranganathan said the benchmark BSE Sensex grew at a compounded annual average growth of 13.71 per cent over a 40-year period since March 1981 till March 2020, while the relative growth in the value of gold was 8.48 per cent, silver (6.92 per cent), bank fixed deposits (8.62 per cent), and PPF (9.41 per cent) during the same timeline.

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He said the data assures investors of better returns in equity. "This revealing data underscores the high degree of resilience of the equity market compared to other investment options and reassures investors of better returns from investing in stocks compared to parking their funds in other competing instruments," Ranganathan added.