The Chaos of Returns: Why Asset Diversification Always Wins
An 11-year journey across asset classes shows one clear winner—not gold, not equities, but diversification.
In our previous article, The Geography of Returns, we explored how the same asset class can deliver wildly different outcomes depending on where you invest—revealing the critical role geography plays in shaping returns. This time, we shift focus from where to what—zooming in on which asset classes have led or lagged over the past 11 years. Using a powerful visual from ET Wealth's TrendMAP, we decode the annual performance rankings of equity (across market caps), gold, silver, debt, and real estate. The goal? To spotlight the unpredictable nature of market leadership and make a compelling case for asset diversification—because chasing last year’s winner rarely works.
Gold: A crisis-tested safe haven that shines brightest when uncertainty peaks.
Silver: A volatile wildcard that dances to the tune of inflation and industrial demand.
G-Sec 10-Yr: A steady anchor offering stability when markets turn choppy.
Equity (Small cap): A rollercoaster ride—prone to euphoria and panic in equal measure.
Equity (Mid cap): The high-beta engine of growth—rewarding in rallies, ruthless in corrections.
Equity (Large cap): The balanced core of equity investing, blending growth with resilience.
Debt (Short-term): A parking spot for capital—safe, liquid, but rarely exciting.
Real Estate: The slow-and-steady tortoise—illiquid but inflation-resistant over long cycles.
Source: Reuters-Refinitiv, NHB. *2025 data is YTD based on 15 April 2025 closing values. Equity, Gold and Silver returns are calculated between the first and the last trading day closing values. Long-term and Short-term bond yields are yearly averages. NHB Residex returns based on yearly average of index numbers.
**The latest NHB Residex data is available up to December 2024 quarter.
For March 2025 quarter, data is yet to be released and therefore, real estate returns are not included for 2025.
Benchmarks used:
Equity (Large cap) : Nifty 50, Equity (Midcap) : Nifty Midcap 100 Index, Equity (Smallcap) : Nifty Smallcap 100 Index,
Silver : MCX Silver futures, Gold : MCX Gold futures, G-Sec 10-Yr : GOI 10Y bond yield,
Debt (Short-term) : GOI 3M bond yield, Real Estate : NHB Residex.
No One Wins Always
The performance of major asset classes—Large Cap Equity, Mid Cap Equity, Small Cap Equity, Gold, Silver, G-Secs (10-year), Short-term Debt, and Real Estate—has zigzagged wildly.
Small Cap Equity hit the top spot 4 times (2017, 2021, 2023,2024) but also crashed to the bottom the equal number of times (2016, 2018, 2019, 2022).
Silver went from +45.9% in 2020 to -8.0% in very next year 2021.
Gold, often thought of as a safe haven, topped the charts 4 times including this year, showing its own volatility. Also note that since 2016, Gold has been in the bottom 3 only twice.
Even 10-year G-Secs, considered the most stable, oscillated between being the best (2015) and middling-to-lagging in others. It came in the bottom 3 only twice.
This erratic movement tells us something critical: no asset class has a “form” that you can reliably bet on.
Stars, Strugglers, and the Case for Diversification
💡 Insight: No single asset class dominates consistently. Winners rotate. Diversification isn't just smart—it's necessary.
The data table below shared reveals a fascinating portrait of volatility, consistency, and the often unpredictable nature of asset class returns over the past 11 years. It clearly underscores why diversification is not just wise—it’s essential.
Let’s start with the undisputed champion of unpredictability: Gold. With 7 appearances in the Top 3 and 3 in the Bottom 3, gold demonstrates its role as both a hero and a laggard depending on the macroeconomic backdrop. Its safe-haven appeal shines during times of crisis (2020, 2023, 2024), but it's also known to underperform when risk assets surge.
Close on gold’s heels is Equity (Mid cap)—showing up 6 times in the Top 3, but also 5 times in the Bottom 3. This reveals its dual nature: explosive during bull markets but vulnerable to sharp corrections.
Silver is similarly bipolar—5 times in the Top 3, and 5 times in the Bottom 3. It exemplifies the speculative nature of commodities, swinging wildly with global inflation, dollar strength, and industrial demand.
G-Sec 10-Yr bonds, often thought of as a ‘boring’ asset, have had 4 Top 3 finishes and only 2 in the Bottom 3. This makes them relatively stable performers—offering a cushion during equity downturns. Similarly, Short-term Debt appears only twice in the Top 3, but also four times in the Bottom 3, reflecting its low-risk, low-reward profile, often crowded out during equity rallies.
What’s surprising is the performance of Small Cap Equities. Despite their reputation for delivering the highest returns in long bull runs, they appear only 4 times in the Top 3, and a steep 5 times in the Bottom 3.
Large Cap Equities, though seen as the blue-chip safe bet, have an evenly split record—4 Top 3 finishes, but also 3 in the Bottom 3. This indicates that even the giants aren’t immune to market mood swings.
Finally, Real Estate has fared the worst—just 1 Top 3 appearance, and 4 in the Bottom 3. Despite being viewed as a stable, long-term asset, the data suggests it hasn't delivered compelling returns on an annual basis for most of the last decade.
The Real Risk of Chasing Past Winners
If you had simply chased the previous year’s top performer each time, you'd have likely bought Small Cap in 2018 (down -29.7%), Silver in 2021 (down -8.0%), or Gold in 2021 (down to -4.3% vs 28.4% the year before).
This pattern is a reminder of a dangerous behavioral bias: recency bias. We expect trends to continue. But in investing, what worked last year might be the laggard next year.
Gold—Safe Haven, but Not Always So Safe
Gold gets touted as a hedge in turbulent times. But even gold had negative years (2015, 2021), and while it held up in crises (2018, 2019, 2020, 2022), it lagged when risk-on sentiment returned.
In fact, gold:
Was top 3 in 7 out of 11 years.
But was never the best performer when equities were in bull runs.
Conclusion: Gold is defensive, not dominant. Use it for stability, not outperformance.
Debt Isn’t Boring—It’s Balanced
Debt, especially short-term and G-Secs, rarely tops the chart—but that’s the point.
It never fell to the bottom and delivered positive returns every single year.
When equities nosedive or get overvalued, this ballast becomes your life jacket.
The Real Estate Laggard
NHB's real estate index shows sobering numbers. Despite being a tangible asset class and a darling of Indian households, it has mostly stayed at the bottom.
Ranked 4 times in bottom 3 and just once in top 3.
Its best performance was a modest 9.1% in 2016.
It never made the top 3 outside that one year.
Real estate’s illiquidity, long gestation, and opaque pricing often dilute its perceived safety.
The Silent Winner—Diversification
If you had invested ₹10 lakh split equally across all 8 asset classes every year, rebalanced annually, your portfolio would have:
Avoided the extreme losses of any single asset.
Captured chunks of upside from leaders each year.
Delivered steadier returns with less stress.
This “average” portfolio wouldn’t be flashy, but it would beat most active attempts at timing.
As Charlie Munger said: “The idea of diversification makes sense to a point… but owning a few things you understand deeply is better.” For the rest of us? Sensible, rule-based diversification wins.
What the 2025 YTD Chart Tells Us
So far in 2025, Gold is again on top. Small Cap is at the bottom. G-Secs are quietly doing 21.5%. It’s tempting to chase the shining metal again, but history advises restraint.
Diversification is the only free lunch in investing. And when done smartly—across uncorrelated assets, not just stocks—it creates a resilient, all-weather portfolio.
Instead, look at the matrix. Embrace the chaos. And let diversification be your strategy, not prediction.
If this piece resonated with you, share it with someone who’s still chasing last year’s winner. And don’t forget to subscribe to Curious Investing Insights for more data-backed stories that simplify investing wisdom.