Gold Vs Equities: Why Gold Has Beaten Every Asset Class Ahead Of Diwali 2025
With such striking outperformance, it is natural for investors to wonder if they should increase their allocation to gold this festive season.
By Shubham Gupta
As Indians gear up for Diwali, gold once again takes the spotlight, both as a traditional purchase and as the best performing asset of the year. From last Diwali to date, gold has glittered brighter than any other major asset class, delivering a staggering 53.8 per cent return. In stark contrast, equities have barely moved. The Nifty 100 TRI is up just 3.1 per cent, the Nifty Midcap 150 TRI by 2.7 per cent, and the Nifty Smallcap 250 TRI has actually declined by 4.9 per cent.
With such striking outperformance, it is natural for investors to wonder if they should increase their allocation to gold this festive season. But before acting on that impulse, it’s worth taking a step back.
Long-term perspective weighs above short-term sparkle
Gold’s recent rally has been fueled by a mix of global and domestic factors including geopolitical tensions, sustained buying by central banks, and expectations of lower interest rates. A weaker rupee has also helped boost returns for Indian investors, making gold one of the most rewarding assets over the past two years.
However, over a longer horizon, equities have delivered equally impressive results. Gold has returned 19.4 per cent CAGR over the last five years, but a large part of that gain has come only in the recent two-year window. During the same period, large-cap equities have delivered around 18 per cent CAGR, while mid- and small-caps have posted an even stronger 27–28 per cent CAGR. The long-term record shows that equities continue to be powerful wealth creators for patient investors.
Winners rotate every year
Another important insight from history is that the best-performing asset in one year rarely stays at the top the next year.
In 2020, gold and silver were the clear winners, posting strong double-digit gains while equities lagged. The very next year, equities made a huge comeback with Nifty Smallcap 250 TRI jumping 86.7 per cent while gold lost value. Now, in 2024–25, gold has once again taken the lead while stocks have paused for breath.
This rotation underscores a key principle of investing: today’s winner can easily be tomorrow’s laggard. Chasing short-term performance often leads to disappointment.
The case for diversification
When it comes to building long-term wealth, diversification remains the smartest approach. Equities drive growth, gold offers protection in uncertain times, and debt adds stability. Each asset has its role to play, and no single one wins every year.
The goal is not to guess which asset will shine next Diwali, but to build a mix that performs across market cycles. A diversified portfolio ensures participation in growth when equities rally, while providing protection during periods of volatility.
This Diwali, it is tempting to add more gold after its stellar run. But the smarter choice lies in discipline and balance. Gold may be sparkling the brightest today, but lasting wealth is built by staying diversified and not by chasing the flavour of the season.
(The author is CFA, co-founder of Growthvine capital)
[Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal and do not reflect the opinions, beliefs, and views of ABP News Network Pvt Ltd.]
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