Tuesday, July 5, 2016

Performance of Real Estate vs Stocks vs Gold in India - 2011 to 2016

When it comes to asset allocation, majority of Indians prefer Gold and Real estate over Stocks as they provide tangibility and sense of security. But sense of security is not sufficient as far as investments are concerned as savings in any form need to beat inflation for creating wealth.

So lets check how each of these asset classes have performed over last 5 years and whether Indians are right in their judgment of allocating majority of their investment capital in Real estate and gold:


Consumer Inflation chart in India
CPI Inflation has averaged around 8% in past 5 years


Gold price chart
Gold Price chart in INR per Ounce
Gold has delivered around 35% return to Indian investors in the past 5 years which is little over 6% compounding return per Annum. Gold has clearly not been able to beat consumer inflation and eroded investors wealth by at least 10%. 


India Real Estate Return Chart
National Housing Board Residex chart
National Housing Board RESIDEX, which shows the average rise in real estate prices across the country, has risen around 32% in the past 5 years and also under-performed Gold returns. The compounded return of this asset class has been around 5.5% per Annum and has eroded investors wealth by roughly 15% in 5 years


Indian Stock Market performance chart
Sensex from 2011 to 2016
Indian Stock Market, having delivered around 42% in the same comparable period,  has outperformed both Gold and Real Estate by good margin but hasn't been able to beat inflation either. SENSEX has delivered little over 7% return per Annum in past 5 years.

The only saving grace in past 5 years was Post office savings and tax saving bank deposits which have delivered over 8% return per annum and has largely not eroded investors wealth.

From the above analysis it's clearly visible that Stock Markets in India are performing better than Gold and Real Estate, however considering the global currency nature of Gold and sense of security associated with Real Estate, one must have exposure to each of these asset classes depending upon his risk profile.

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