How are different Assets Performed? The Asset Allocation Dilemma!

Everyone wants to invest in the best-performing asset class every year. But, the thing is, it is nearly impossible to choose the best asset class consistently. That’s why diversification is key.

Harry Markowitz rightly said that “diversification is the only free lunch in investing”. This is the notion that holding a broader range of assets can result in reducing the overall risk and increase the likelihood of achieving more stable and consistent returns over time.

Diversification is a vital concept widely accepted by many investors across borders. It is an important tool to help investors achieve the proper balance between return and risk for their situation. Crafting a diversified portfolio requires a blend of asset classes tailored on the basis of one’s risk profile, financial goals, and investment horizon. This is where asset allocation comes in.

Asset allocation is a strategy that involves distributing the portfolio’s investment into different asset classes, such as equity, debt, cash, real estate, etc. Let’s look at the important factors for the right asset allocation mix:

Now, let us look at the performance of different asset classes.

Period Gold Silver Real – Estate Bonds Crisil T-Bills Sensex TRI
30 Sep 22 – 30 Sep 23 17.67% 30.09% 4.88% 7.72% 6.74% 16.15%
30 Sep 21 – 30 Sep 22 7.15% -10.76% 7.36% 1.03% 3.18% -1.64%
30 Sep 20 – 30 Sep 21 -8.27% -2.28% 2.68% 5.83% 3.89% 56.96%


Property: (Composite HPI for 50 Cities)
Bonds: CRISIL Composite Bond Index
T- Bills: CRISIL 1 Year T-Bill Index
Gold and Silver: RBI Monthly Average Price of Gold and Silver in Mumbai
Sensex TRI: Ace MF

To judge the performance of an asset class, any investor’s go-to would be to look at its return on investment. However, data shows that every year, the winner amongst asset classes varies since the market is at the confluence of multiple variables. In the year Sep 2022-23, silver was the best performing asset, however, in the years Sep 2021-22 and 2020-21, silver has given negative returns. Similarly, different asset classes have performed differently in different market phases. So, investors should create a well-diversified portfolio in which their money is spread across a range of asset classes in accordance with their investment objective and risk profile.

Conclusion: The quest for an optimal asset allocation must be based on the factors above rather than just picking top performers. Equity can provide long-term growth, and the stability of debt and gold can help safeguard the capital for the long term. Choosing the right asset allocation may seem like a challenging task, and hence, an investor should opt for the guidance of a financial advisor who can help investors make informed decisions.