Understanding the Asset Class Infographic
A recent infographic from ET (see image below) highlights the annual performance of various asset classes over the past decade, including silver, gold, and equities across different market capitalizations. Each year, these asset classes are ranked based on their returns, helping investors identify patterns and shifts.
10-Year Returns: Equity Still Leads, But with a Twist
Surprisingly, mid-cap equities outperformed all other asset classes over the last ten years, delivering an average return of 16.1%. Gold followed closely behind with a return of 13.9%, while small-cap equities delivered 13.2%. Silver returned 11.9%, and large-cap equities had an average return of 11.8%. On the lower end, government securities (G-Secs) provided a return of 6.9%, short-term debt yielded just 6.1%, and real estate returned only 5%—all figures are before taxes.
Why Diversification Matters
One key insight is that no single asset class remains at the top every year. For example, silver once delivered a remarkable 45% return, and small caps surged by 54% in a single year. However, such spikes are rare, and performance tends to rotate among asset classes. Therefore, relying on only one segment—such as large-cap equities or G-Secs can limit potential growth.
Balancing Risk and Volatility
While small-cap equities and gold have shown similar long-term returns, their levels of volatility differ significantly. Gold tends to be more stable, while small caps are much more volatile. Thus, why take on additional risk if the end returns are nearly equivalent? A more effective strategy may involve combining different assets to reduce overall portfolio volatility while still maintaining returns.
Inflation and Real Returns
Government-reported inflation figures may not accurately reflect the actual situation. If real inflation is closer to 10–11%, then investments in low-yield instruments like G-Secs or short-term debt may fail to preserve real wealth—especially after taxes. A cautious approach that includes some exposure to higher-risk assets can help bridge this gap.
What are your thoughts on the shifting performance of asset classes? Do you actively diversify your investments? Share your views in the comments below! If you found this blog useful, don’t forget to SHARE it with your friends.
