Gold Outperforms Stocks in Past Year, But Long-Term Strategy Crucial: Investor Insights

Ace investor Vijay Kedia recently commented that "Wealth without creativity is just lifeless money," responding to gold's recent higher returns compared to stocks. Kedia questioned the engagement and contribution from gold investments, stating that stock investing keeps one intellectually and emotionally alive by connecting with innovation and progress.

The article presents comparative returns, showing that gold delivered over 50% returns in the last year (ending September 30, 2025), while stocks lost over 5%. This stark difference is attributed to the recency effect, where recent performance heavily influences perception.

However, over five years, stocks have performed better than gold. Over a 20-year period (ending September 30, 2025), gold yielded 15.2% annually versus stocks at 13.5%. An investment of INR 1 lakh in gold grew to INR 16.9 lakh, whereas in stocks it amounted to INR 12.6 lakh.

The analysis also contrasts this with data as of September 30, 2024, where stocks outperformed gold across all periods, including a 20-year return of 16.4% per year for stocks versus 13.3% for gold. This flip demonstrates how performance perception can change and highlights the unpredictability of asset class returns.

Kedia's point about stocks offering intellectual and emotional engagement is explored, but the article also notes that understanding gold's history can provide insights into financial systems. Ultimately, most investors prioritize returns over intellectual stimulation.

The article warns against recency bias, where recent surges in one asset class lead investors to favor it, potentially at market peaks. It points out that both gold and stocks experience lean cycles and volatility; gold can fall sharply, as seen by a 7% drop in just 10 days in October 2025.

The crucial takeaway is the classic investment advice: diversify. Spreading investments across stocks, gold, fixed deposits, and provident funds helps mitigate risk, as no single asset class guarantees consistent outperformance. Investing is presented as a long-term Test match requiring patience, discipline, and strategic shot selection, rather than a T20 sprint.

Impact: This news is highly relevant for Indian investors making asset allocation decisions. It influences how individuals perceive the risk and reward of stocks versus gold, potentially guiding investment strategies and portfolio diversification. The commentary from a prominent investor like Vijay Kedia amplifies its significance. Rating: 7/10.

Difficult Terms: Total Returns Index (TRI): An index that includes not only the price changes of the underlying assets but also the reinvestment of dividends paid by the companies. Compounding: The process where an investment earns returns, and then those returns themselves start earning returns, leading to exponential growth over time. Recency Bias: A cognitive bias where people tend to place more importance on recent events or information than on older information, often leading to skewed decision-making. Volatility: The degree of variation of a trading price series over time, usually measured by the standard deviation of logarithmic returns. High volatility means prices fluctuate greatly; low volatility means prices are relatively stable. Diversification: A risk management strategy that mixes a wide variety of investments within a portfolio, aiming to reduce risk. The idea is that by holding a variety of assets, you can offset potential losses in one area with gains in another. Macroeconomic: Relating to or being the characteristics of the economy of a nation or region as a whole. It involves studying aggregate supply and demand, inflation, unemployment, and economic growth. Investment Cycles: Periods of expansion and contraction in the value of assets or markets. Understanding these cycles helps investors time their entry and exit points. Retail Investors: Individual investors who buy and sell securities or products for their own personal account, rather than for another company or organization. Gold Bugs: A term for individuals who are strong advocates for investing in gold, often believing it is a superior store of value and hedge against inflation and economic instability. Asset Class: A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations. Common examples include stocks, bonds, real estate, and commodities.