Gold or stocks? Which is the better Diwali bet?

Gold or stocks? Which is the better Diwali bet?

Gold’s outperformance over the past year has surprised investors across the board, while Dalal Street’s lagging performance has dampened sentiment and raised questions about the near-term equity outlook.

However, with the festive season right around the corner, Moneycontrol analyzed the returns of gold and equities every Diwali from 2010. While equities have seen steady compounding over the years, gold has demonstrated more volatility - with large periods of lacklustre performance and then sharp spikes in prices.

If an investor had allocated Rs 10,000 every Diwali since 2010 into the Nifty 50 as well as gold, the outcomes today would be starkly different!

Investing Rs 10,000 into gold every Diwali since 2010, would lead to a strong outperformance over equities. The systemic yearly investment in gold would lead to Rs 1.5 lakh turning into Rs 4.47 lakh over the years. On the equity front, a yearly Rs 10,000 investment on the same day would turn into Rs 3.72 lakh as of today.

This means that investing Rs 10,000 every year since 2010 would have made Gold outperform Nifty in absolute terms, growing by almost 4.5× the contributions, while Nifty would grow 3.7x over 15 years.

However, if an investor started their investing journey a little after the past 15 years, and decided to put capital into gold and equities every Diwali over the past five years, the returns in gold would still outperform equities.

Diwali to Diwali, over the past five years, gold has seen a compounded annual growth rate (CAGR) of 16.1 percent, while the Nifty 50 has a 13.8 percent CAGR. Zooming out over the past ten years, the difference narrows: gold has a CAGR of 15.1 percent, while Nifty 50’s CAGR is 12.3 percent.

A single Rs 10,000 investment in either Nifty 50 or gold at different years on Diwali would also yield in the shiny metal outperforming its equity counterpart. If invested in 2010, equities would have grown to around Rs 39,180, while gold would be worth Rs 54,200 today.

An investment in 2015 would see Nifty 50 at Rs 31,630 compared with gold’s Rs 41,340. For more recent investments from 2020, both assets delivered healthy returns, with Nifty at Rs 19,370 and gold slightly ahead at Rs 20,980.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.