The Common Belief
Most people believe that equities always perform better than debt. It feels like there is no point in staying invested in debt when stocks are known to create wealth. But history shows many phases when equities did not outperform debt for years. Data from past decades proves that debt has given strong competition to equities in several periods.
IMPORTANT ANNOUNCEMENT
From 15th of Aug 2025, we have started sharing all our strategy updates, rebalances, and important announcements on our official WhatsApp Channel.
Why this change?
Because it’s simpler, faster, and right where you already are — WhatsApp makes staying updated effortless.
Stay updated with:
Strategy updates & rebalances
Exclusive announcements & offers
Important reminders – all in one place
Here’s an instruction manual if you are not aware.
Times When Debt Outperformed
From 1986 to mid-1990, a span of almost four and a half years, debt gave very high double-digit returns.(see the image below).
During this time, equities lagged behind and took a long time to catch up. A similar phase happened after the big market peak of 1992 when stock valuations had gone extremely high. (see the image below)
For almost a decade after that, stocks went into a dull period while debt gave better results. It was only by 2003 that equities started moving again, and by 2007 they finally matched the returns of debt from that earlier period.
The 2008 Market Highs
Another clear example was the period after the 2008 highs. Stocks were priced at very high levels then, and what followed was almost six years of flat or weak performance.
Debt, on the other hand, doubled in that period. It took almost ten years for equity returns to catch up with debt returns. These phases show that stocks do not always give quick or smooth returns and can underperform for very long stretches.
Why Asset Allocation Matters
The lesson here is that near market tops, equities often underperform for several years. During such times, other asset classes like debt or gold can perform better. This is why it is important not to put all money in just one place. Instead, a balanced asset allocation helps reduce the risk of long dull phases in equity. If someone can tactically switch between assets at the right time, it can be powerful, but in reality, this is very difficult for most people.
Long-Term View of Equities
It is true that over very long periods, equities remain the best wealth creator. No other asset class has shown such high potential over decades. But the key point is that investors need to check if they can handle the pain of waiting during 3, 5, or even 10 years of underperformance. The right investing style always depends on a person’s patience, personality, and financial needs.
