Friday, May 27 2022

The winners among asset classes continue to rotate, but equities (including large, mid and small caps) have been the best performers most years, according to annual performance data collected over the past 10 years for various asset classes (see table, check online for full table). Here’s a quick rundown of what the data says about each asset class.

Higher yields : The best year for domestic equities in these years was FY21. The low base effect in FY2020, in which markets experienced a sharp correction due to the covid outbreak -19, helped FY21 returns, in addition to a stronger economic recovery and global quantitative easing. A closer look at returns reveals that the small cap segment has outperformed all other asset classes in five out of 10 years. However, it has also fallen sharply relative to others during the years of market corrections.

Additionally, the mid-cap index has not been the best performing or worst performing asset over the past 10 years. But Mint’s analysis shows that the mid-cap index has outperformed over the 10-year period based on trailing returns for the period between March 2015 and March 2022. there will be a big difference in valuations,” said Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

International diversification: The direction (up or down) of annual returns for domestic and international equities (S&P 500 index, in this case) was the same in most years. “When we say that international markets offer diversification, perhaps it’s not just in terms of market movement,” said Prableen Bajpai, founder of FinFix Research and Analytics. Over a longer period, Indian markets and global markets have a positive correlation but not a very high positive correlation. “Also, in times of crisis, there will be enormous pressure on the rupee. International investments may not benefit in terms of dollar returns, but help in terms of rupees,” she pointed out.

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Bumpy race for gold: Data shows that gold has underperformed more times than other asset classes. The best years for gold have been the worst for equities. Ghazal Jain, fund manager, Alternative Investments at Quantum AMC, said gold has an inverse relationship with risk assets and currencies and is often negatively correlated with a strong global economy.

“Gold is sometimes more volatile than other assets, including stocks, but that’s usually a short-term phenomenon,” said Dr. Joseph Thomas, head of research at Emkay Wealth Management. “The exposure to gold helps in events like the crisis and one should hold around 5-10% of their portfolio in gold,” Thomas added.

golden bottoms: The one-year average return of the Crisil 10-year Gilt Index (7.1%) over the past 10 years was only slightly higher than that of the Crisil 91 Day T-Bill Index (6.8%). Joydeep Sen, an independent debt market analyst, said: “An examination of the long-term returns of gilt funds and liquid funds reveals that the former have performed much better than the latter. »

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