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A report released by NJ Wealth reveals that equity funds have beaten inflation by a handsome margin of 12.42% in the last 25 years.
The report shows that equity funds have delivered CAGR of 18.66% in 25 years as against CAGR of 5.55% of inflation, indicating that equity funds have generated real return of 12.42% over the last 25 years. In other words, Rs.1 lakh invested in equity funds has become Rs.72.02 lakh in 25 years.
Further, the report reveals that 8 out of 10 equity schemes have delivered CAGR of more than 15% in 25 years. It said, “The mantra for building wealth is quite simple. An investor just needs to be disciplined, invest in the right asset class and remain invested for a longer period of time to reap the benefit of the power of compounding.”
On the other hand, gold has generated real return of 4.56% in the last 25 years. The asset class has delivered CAGR of 10.36% as against 5.55% of inflation during this period. In absolute terms, the value of Rs.1 lakh invested in gold has become Rs.11.76 lakh.
FDs fare the worst when it comes to generating real returns. FDs have delivered CAGR of 7.28% as against 5.55% inflation in 25 years indicating real return of 1.63%. Rs.1 lakh invested in FD became Rs.5.78 lakh in 25 years. If we factor in tax, the real return will be less than inflation for investors who fall under 30% tax slab.
Let’s look at this table to know more:
|
Investment instruments |
Inflation in % |
Return in % |
Real Rate of Return in % |
|
FD |
5.55 |
7.28 |
1.63 |
|
Gold |
5.55 |
10.38 |
4.56 |
|
Equity Fund |
5.55 |
18.66 |
12.42 |
Source: NJ Wealth
Note: All returns indicate CAGR of 25 years
