Indian shares under the Nifty50 index returned a compound annual growth rate (CAGR) of 14 per cent in the last 20 years, effectively adding 13 times the wealth of investors, as per a report published on Monday.
Gold marginally outpaced equities in the same 20 years, returning a 14.7 per cent CAGR and growing 16 times.
Conversely, debt and real estate investments made relatively lower returns, compounding over two decades at 7.7 per cent and 7.5 per cent, respectively, as noted in FundsIndia's September Wealth Conversation Report.
On a longer-term horizon, domestic equities have actually performed better, delivering a 13.6 per cent CAGR over a span of 35 years and growing wealth 88-fold.
Globally, the US equity benchmark S&P 500 posted a 14.7 per cent CAGR over the past 20 years, multiplying investor wealth by 15.6 times.
In India, small-and mid-cap shares were the largest wealth builders. The Nifty Smallcap 250 gave a 14.2 per cent CAGR, which rose 14 times in 20 years, whereas the Nifty Midcap 150 accelerated 16.2 per cent each year, building 20 times the wealth. Large-cap shares, for which the Nifty 100 is a proxy, compounded at a 13.9 per cent CAGR and built 13.6 times the wealth in the same time frame.
The study also emphasized long-term investment. The chances of a negative return were very high for short-term investment: 43 per cent for intraday Nifty50 stocks, 39 per cent for one-month investment, 31 per cent for three-month investment, and 23 per cent for one-year investment. But this risk declined very steeply over longer horizons: 6 per cent for three years, 0.1 per cent for five years, and became very small for seven to ten-year holding periods.
Also, the report revealed that 73 per cent of the time, Nifty50 stocks have doubled in 6–7 years, 80 per cent of the time they have tripled in 10–11 years, and 76 per cent of the time they have quadrupled in 12–13 years.
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