Equities have been the best investment in past 25 years: Report

Equities have created more wealth for their holders than other asset classes.

By: PTI | Mumbai | Published:September 4, 2016 4:22 pm

Equities, not just in the domestic context but across the globe, have been the best asset class in the past 25 years, with the Sensex and the Nifty being the second best performers among top 10 global indices with an average of over 12 per cent returns.

The Shanghai Composite Index of China tops the list among top 10 global indices by giving a CAGR of 12.9 per cent during the 25-year period, according to an analysis of various asset classes and their returns by the city-based brokerage Centrum Group. The data pertains to the 25-year period ending July 31, 2016 and are in local currency terms, the brokerage said. Our study prove that the equities have trounced all other asset classes – be they currencies or commodities or real estate, by a wide margin. Of course some of these asset classes have given higher returns over a short-term, but for the long term it is definitely the equities, Centrum analysts Sweta Chawla and Siddhartha Khemka said.

“These numbers confirm the belief that equities have created more wealth for their holders than other asset classes. Of course, this has happened over a longer time frame and the asset class comes with its own set of volatilities in the shorter time frame,” they told PTI.

While the Sensex has given in a CAGR of 12 per cent for past 25 years, Nifty has been a notch better at 12.1 per cent, while in dollar terms this have been 7.9 per cent each. Against this, the Shanghai index gave in 11.9 per cent during the period in dollar terms. Over the past 10 years, the Sensex and Nifty top the chart with 10.1 per cent and 10.7 per cent respectively, while the shanghai was a low 6.7 per cent. Similarly, from a five-year perspective, too, the domestic indices have come in a close second with 9.1 and 9.6 per cent respectively against 10.9 per cent return by the Nikkei and S&P500, and Dow Jones at third with 8.8 per cent. Against this, the Chinese index has been the worst performer with a paltry 2 per cent returns during the same period.

The Brazilian index Bovespa has given 11.8 per cent , 4.5 per cent and -14.2 per cent for the 20, 10 and 5 year periods as 25 year data is not available. In the case of the German index DAX the returns for the 25, 10 and 5 year period have been 7.7 per cent, 6.1 per cent and 7.6 per cent, and that of
the Hang Seng of Hong Kong it has been 7 per cent, 2.7 per cent and 0.4 per cent.

The British FTSE’s stood at 3.9, 1.3 and 2.9 per cent each, and French CAC has given back 3.8,-1.2 and 3.9 per cent. But the third largest index Nikkei has been disappointment over the 25 years with a negative -1.5 per cent return, 0.6 per cent for a 10 year period in terms of the yen but the best in the 5-year tenor at 10.9 per cent.