A recent report by Edelweiss Mutual Fund suggests that equities could generate better returns than gold over the next three years. While gold has historically performed well during financial crises, equities tend to thrive in periods of economic growth, making them a more attractive investment in the current market scenario.
The report noted that based on the Sensex-to-Gold Ratio, historical trends indicate that equities may outpace gold in the coming years. Over longer periods, equities have consistently outperformed gold, particularly over five-year and ten-year investment horizons.
Equities vs. Gold: Historical Performance
Gold and equities have long competed as preferred investment options. Gold is often seen as a safe-haven asset during economic uncertainty, attracting investors seeking stability. In contrast, equities tend to deliver superior returns during periods of strong economic expansion and rising corporate earnings.
The report highlighted that over the past 25 years, gold has provided an annual return of 12.55%, while the BSE Sensex has delivered 10.73%. However, the comparison comes at a time when gold is at the peak of a rally. Similar to a race, a snapshot taken mid-way does not determine the final outcome.
Additionally, data from the report showed that over a 10-year period, gold has outperformed equities in only 36% of cases. This means that despite short-term volatility, equities have provided better returns in most instances.
Investment Outlook
The findings reinforce the notion that equities remain a strong long-term asset class. While gold will continue to serve as a hedge against uncertainty, historical data suggests that investors seeking long-term wealth creation may find equities a more rewarding choice.
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