Look back at the last 11 years since the calendar year 2015 and you will find the precious metals dominating in 6 out of the last 11 years. If gold was the best performer in 2018, 2019, 2022, & 2025; it was silver in 2016 and 2020. Out of the remaining 5 years, equity small caps have been the outperformers in 4 years, while 10-year government securities were the top performers only in 2015. What does this say about investment assets in India in the last 11 years? 

The presence of equity small caps in the top shows that alpha hunting has been the theme for most investors. Also, the last decade saw a lot of quality small caps coming into the market and putting up a good performance. But there is a much bigger lesson than that. In the last 10 years, gold and silver are being looked at by investors as alpha assets. This is in contrast to the past, when gold was seen purely as a safe haven to store value when the chips were down. One reason could be the persistent state of volatility post 2008, which has made gold less of a safe haven and more of a high growth asset to be trading on. 

A word of caution here. Gold and silver are not entirely without their downside risk. For instance, in three of the last 11 years, gold was among the bottom-3 performers. If you look at silver, then silver was in the bottom-3 in five out of the last 11 years. That is a lot of risk on the downside that investors appear to be ignoring. For many investors who started investing after 2008, and that is a vast majority of our GenX and GenZ investors, they have never seen a bear market in gold. Hence, the tendency is to believe that gold only goes up. For example, in the US, gold had a massive rally between 1971 and 1980, but after that it went into an 18-year bear phase. So, what should investors really do? 

The last 10 years may not be reflective of the next 10 years. At the end of the day gold is an unproductive asset. Its value comes from the fact that it is like a globally accepted currency and supply of the precious metal is limited. In the last few years, it is not just retail buying but even central banks were buying gold as an alternative to holding reserves in US dollars. After all, the US could go on printing dollars and run up huge deficits, which was not possible with gold. Such benefits are real, but they also have their limits. For investors, 10-15% in gold is essential, but as a hedge. Do not mistake gold to be a wealth creator!