Asset Classes and Returns Over the Last Decade

In this article, I look at some of the common asset classes and their returns over the last 20 years and since the financial crisis.

Historical Returns of common asset classes over 20 years and since the financial crisis

Asset classes can be broadly classified into 2 asset classes, income-producing and non-income producing.

Some caveats.

1. We don’t consider any leverage in calculating these returns.

2. We don’t take into account any tax consideration.

We will start with some of the common and most popular asset classes.

1. Gold

Gold has long been a safe haven during difficult times. Gold is also a hedge during inflation when people lose faith in the sovereign currencies, they seek safety in Gold. Culturally in India, gold is considered auspicious and has been in high demand during marriage seasons and on festivals.

If we look at historical returns over the last 20+ years, we see that in INR terms, Gold has annualized returns of about 10% with the volatility of around 13-14%.

But, if we look in US dollars terms, returns are much lower at 5-6% with 15% volatility.

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2. Real Estate

Next, we look at the real estate. We will use the Housing price index from the reserve bank of India. As we can see that in rupee terms, we got a return of 12.35% with a volatility of 7.47%, but in dollar terms, the returns are meager 8.46% with a volatility of 10.18%.

Also, if you put only 30% down, and take a loan at 7-8%, with 12% returns in INR< your returns will be higher. But, leverage can work both ways.

3. Indian Equities (Nifty 50)

Coming to equities, we see that since the financial crisis, equities have slightly higher returns both in Indian rupees terms and in USD, but with much higher volatility.

And most of these returns are front-loaded in 2009 of about 75%. If we remove this year, then we have average annualized returns of only 9% with 17% volatility in INR terms and 4% return with 22% volatility in USD terms.

That is a very dismal performance by any means.

4. Indian Equities (BSI)

Coming to equities, we see that since the financial crisis, equities have slightly higher returns both in Indian rupees terms and in USD, but with much higher volatility.

And most of these returns are front-loaded in 2009 of about 90%. If we remove this year, then we have average annualized returns of only 9% with 17% volatility in INR terms and 4% return with 22% volatility in USD terms.

That is a very dismal performance by any means.

5. US Equities

US equities have performed okay since 1996 but have done really well since the financial crisis. Looking at the returns since ’08, we see the returns of 12% with a volatility of 11% as compared to a 6% return with a higher 17% volatility over the longer term.

6. US Private Equity

Looking at the historic returns for Private Equity for the last 25 years, we see steady returns in low double-digit of 13% with lower volatility of 10%. But, these returns are self reported. So, adjusting for selection bias and survivorship bias, we assume returns of 11% with 12% volatility.

7. US Venture Capital

For Venture Capital, we see returns coming down over last ten years. Over 30 years, returns have been around 20%, but only 10% in the last 10 years, both for early-stage and late & expansion stage VCs.

If we remove year 2000, then last 30 years return have been around 11% only with 23% volatility. And for last year, we have returns of around 10% with 13% volatility.

Conclusion – putting it all together

US is still the center of innovation, and technology is the largest sector in the S&P. And, we can see that from the US public market returns.

If we plot returns of all the four asset classes in USD terms in one chart, we see that US equities have done best in the last ten years.

Although past performance is not a guarantee of future returns, but US is still the global leader in innovation and research, that can help US outperformance in the long run.