Key Highlights

• Gold has outperformed most equity markets over long periods

• GDP growth does not guarantee strong stock market returns

• Diversification reduces risk without hurting long term returns

• Liquidity flows follow performance they do not create it

• Valuations strongly influence long term equity outcomes

• SIP discipline matters more than timing the market

Financial markets are full of ideas that feel intuitively correct. Stocks beat gold. GDP growth fuels equity returns. Domestic liquidity provides an unbreakable floor. Valuations don’t matter in the long run. Small caps always outperform.

These ideas are repeated so often that they gradually turn into unquestioned truths.

The NETRA January 2026 report from DSP Asset Managers Pvt. Ltd. does not attack these beliefs emotionally. Instead, it subjects them to something far more unforgiving: long-term data across cycles, countries, and regimes.

What emerges is not a pessimistic view of markets but a more realistic one. One that rewards humility, diversification, and valuation discipline over confidence and storytelling.

Gold vs Equities : The Asset Everyone Underestimated

For decades, gold has been labelled a “pet rock” an unproductive, non-yielding asset that exists largely due to fear. Equity investors often argue that since stocks generate earnings and dividends, they must always outperform gold over long periods. The data quietly dismantles this assumption.

Over the entire 21st century, gold has outperformed every major equity market globally in local currency terms. In India, only about one-fourth of NSE 500 stocks managed to beat gold over the last 20 years. In developed markets like the US and UK, the percentage drops into single digits.

This does not imply that gold is superior to equities. What it shows is that excluding gold entirely from a portfolio has historically been a costly mistake. Markets do not move in straight lines, and long periods of equity underperformance are not theoretical they are lived experiences.

Gold’s role is not to maximize returns, but to protect portfolios during regimes where financial assets struggle simultaneously. Investors who understand this stop debating gold versus stocks and instead focus on balance.

Gold Is Not Always Right - And That’s Exactly Why It Works

Interestingly, the same report also debunks the opposite extreme: that gold is the ultimate safe bet.

When viewed through rolling five-year periods, gold outperforms equities only about one-third of the time across major regions. In the remaining periods, equities deliver superior returns, often by wide margins.

This reinforces a critical insight: no asset class wins consistently. Gold shines during monetary stress, equity de-rating, and currency debasement. Equities thrive when earnings grow and capital is priced efficiently.

The real lesson is not about picking the “best” asset but about owning assets that behave differently across cycles.

Diversification Is Not Diworsification - It’s Risk Control

One of the most damaging narratives in bull markets is that diversification dilutes returns. Investors who experienced strong equity rallies often conclude that anything other than equities is dead weight.

NETRA’s multi-asset analysis tells a different story.

A simple portfolio combining domestic equity, debt, international equity, and gold has historically delivered returns comparable to equities, but with dramatically lower volatility. In India and most global markets, this diversified approach actually outperformed pure equity portfolios over long periods.

The reason is straightforward. Every asset class has weak phases. What diversification does is prevent all parts of the portfolio from failing at the same time. Lower volatility also improves investor behavior reducing panic exits and allowing compounding to work uninterrupted.

In investing, the best portfolio is not the one with the highest peak return, but the one investors can actually stick with.

GDP Growth Is Not a Proxy for Equity Returns

A deeply ingrained belief among investors is that fast-growing economies automatically produce high equity returns. China should have been the greatest stock market story of modern times. Instead, it became one of the biggest disappointments.

Despite exceptional GDP growth, Chinese equity returns barely compounded at half that pace. Similar patterns appear in Malaysia and the Philippines, where strong economic growth translated into weak or even negative real equity returns.

Meanwhile, slower-growing economies like the US quietly delivered superior long-term equity performance.

The disconnect exists because stock returns depend on earnings growth and capital efficiency, not GDP headlines. Dilution, poor capital allocation, regulation, and valuation excesses can erase the benefits of economic expansion.

For investors, this means one thing : macro optimism is not a substitute for business fundamentals.

The $30 Trillion India Dream Needs a Reality Check

The idea that India will become a $30 trillion economy by 2050 has gained enormous popularity. The math behind it, however, is far less forgiving.

To reach that milestone, India must grow at nearly 9% real CAGR for 25 consecutive years. History shows how rare this is. India has crossed 8% growth only sporadically, often as a rebound after weak years. Sustained high growth over long rolling periods has been the exception, not the rule.

Even under optimistic assumptions where India doubles its GDP every decade, the economy reaches closer to $20 trillion, not $30 trillion.

This does not undermine India’s long-term story but it highlights the danger of anchoring investment expectations to aggressive macro projections.

Liquidity Does Not Guarantee Returns

Another popular belief in recent years is that strong domestic flows create a permanent floor for markets. The assumption is simple: if money keeps coming in, prices must keep rising.

Reality has been less cooperative.

Despite massive cumulative inflows since late 2024, Indian equity markets delivered largely flat returns. Flows surged after strong past performance and slowed when returns stagnated or turned negative.

This confirms a timeless truth: flows are reactive, not predictive. They chase performance rather than create it.

Markets move on earnings, valuations, and expectations not on the comfort of knowing that money exists somewhere in the system.

Why Today’s Best Funds Rarely Stay the Best

Performance chasing remains one of the most destructive investor behaviors.

The data shows that 60–80% of top-quartile mutual funds fail to remain in the top quartile over the subsequent three years. In several periods, every top-performing fund slipped meaningfully in rankings.

Investors often treat past returns like guaranteed mileage figures. In reality, high returns often reflect favorable cycles, sector concentration, or valuation expansion none of which are permanent.

Selecting funds purely on recent performance is not investing. It is recency bias disguised as strategy.

Market Targets : Precision Without Accuracy

Every year, institutions publish index targets with impressive precision. And almost every year, reality diverges sharply.

Over the past 25 years, forward index targets were almost never negativeeven though markets ended negative in multiple years. During major turning points, forecast errors reached as high as 30–50%.

This highlights a core problem: forecasts extrapolate the present, while markets discount the future.

Listening to targets may feel reassuring, but history shows they offer confidence without reliability.

Valuations Always Matter - Especially Over the Long Run

Perhaps the most dangerous myth is that valuations don’t matter if you invest long enough.

The data clearly shows long stretches sometimes 10 to 15 years where equities underperformed debt. These periods were not random. They followed phases of extreme optimism and high starting valuations.

When stocks are priced for perfection, even decent earnings growth fails to justify returns. Investors end up with bond-like outcomes but equity-level volatility.

Time cannot fix a bad starting price.

Small & Midcaps : Alpha Comes With a Cost

Small and mid-cap stocks outperform spectacularly during bull markets. Every cycle reinforces this belief. But every cycle also ends the same way with that excess alpha erased during drawdowns.

NETRA shows that when small and midcaps trade at high relative premiums to large caps, future returns tend to disappoint. Ironically, the best time to buy SMIDs is when they have already underperformed and sentiment is pessimistic.

At present, SMIDs enjoy a large alpha over large caps historically a phase that calls for caution, not aggression.

Risk Is Not Rewarded the Way We Think

Higher volatility portfolios feel exciting during bull markets, but they inflict deeper damage during stress periods. Over full cycles, low-volatility and low-beta portfolios have delivered comparable or better returns, with significantly lower drawdowns.

The math of compounding favors survival. Losing less in downturns often matters more than gaining slightly more in upcycles.

SIP Timing Matters Far Less Than Discipline

Finally, NETRA addresses one of retail investing’s biggest anxieties: “Am I starting at the wrong time?”

Rolling 7-year SIP data shows that returns remain tightly clustered regardless of whether investments began at market highs, lows, or after sharp rallies.

Consistency beats timing. Always has.

Final Thought : Cut the Noise

The most powerful message of NETRA is not about any single asset or strategy.

It is about reducing noise, resisting narratives, and anchoring decisions in data, valuation, and diversification.

Markets will always tempt investors with stories. Long-term wealth is built by those who ignore the stories and respect the cycles.

Sources : Click Here