Gold vs Nifty 50: Which investment created more wealth over the past 10 years?

Gold is widely regarded as a safe-haven asset, while the Nifty 50 represents India's top 50 listed companies. Their performance can be objectively compared through ETFs that closely track these underlying assets.

For a clear comparison, Nippon India ETF Gold BeES, India's largest gold ETF with assets under management (AUM) of ₹56,755 crore, and the SBI Nifty 50 ETF, the largest Nifty 50 ETF with an AUM of ₹2,05,278 crore, have been considered.

Under SEBI regulations, ETFs are required to invest at least 95% of their assets in the underlying index or commodity they track. Accordingly, Nippon India ETF Gold BeES mirrors domestic gold prices, while the SBI Nifty 50 ETF tracks the Nifty 50 Total Returns Index (TRI), making them suitable proxies to compare the performance of gold and the Nifty 50.

Let's find out which one emerged as the winner: gold or Nifty 50.

Nippon India Gold ETF vs SBI Nifty 50 ETF: Past performance

If you had invested a lump sum amount of ₹1 lakh in Nippon India ETF Gold BeES a year ago, your investment would have grown to ₹1.43 lakh. On the other hand, the same investment in SBI Nifty 50 ETF would have declined to ₹96,460.

A ₹1 lakh investment in the gold ETF five years ago would now be worth ₹2.81 lakh, compared with ₹1.60 lakh in the Nifty 50 ETF.

Over a 10-year period, the performance gap narrows. A ₹1 lakh investment in Nippon India Gold ETF would have grown to ₹3.95 lakh, while the same investment in SBI Nifty 50 ETF would be worth ₹3.33 lakh.

This analysis shows gold has significantly outperformed the Nifty 50 over the short term, particularly in the last one to five years. But the gap narrows over longer investment horizons. Over 10 years, both gold and the Nifty 50 have delivered broadly similar long-term returns.

Nippon India Gold ETF vs SBI Nifty 50 ETF: Risk metrics

After analysing returns, let's compare the risk metrics of the two ETFs.

• Although both ETFs have negative alpha, the gold ETF has outperformed the Nifty 50 ETF on this metric, indicating a smaller degree of underperformance against its benchmark.
• Both ETFs have a beta close to 1, indicating that they tend to move broadly in line with their respective benchmarks.
• The gold ETF has a higher standard deviation than the Nifty 50 ETF. This suggests that the gold ETF has been more volatile over the period.
• Gold ETF has a sharpe ratio of 1.43, significantly higher than 0.30 for the Nifty 50 ETF. This indicates that gold ETF delivered better risk-adjusted returns, generating more return for every unit of risk taken.

Based on the performance of these ETFs, gold outperformed the equity market, represented by the Nifty 50, over the short to medium term. Gold delivered higher returns and better risk-adjusted performance, but with higher volatility. However, over the long term, the performance gap narrowed considerably, with both asset classes creating broadly similar wealth.

Disclaimer: This is purely for educational/ informational purposes and should not be taken as any investment advice. Always consult a SEBI-registered advisor before making any investment decisions.