This Diwali, should you buy gold or stocks? What history and logic tell us

For conservative investors, gold remains a good stabilizer during volatility.

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As India lights up for Diwali, investors once again face a familiar dilemma: should you buy gold or invest in stocks this festive season?

 

Both these assets have long held pride of place in Indian portfolios — gold for its emotional and cultural value, and equities for their potential to build long-term wealth. But which is the more dependable route to prosperity in the years ahead?

 

Gold Has Outshone Equities — For Now

 

• Over the past year, gold has delivered massive returns of around 50%, driven by global trade uncertainty, rising debt levels, and central bank buying.
• In India, gold ETFs like GOLDBEES have generated nearly 55% returns in just one year — making gold one of the best-performing assets of 2025.

 

Meanwhile, the Nifty 50 index — a benchmark for large-cap equities — has been almost flat over the past year, after a strong post-pandemic rally. 

At first glance, gold seems unbeatable. But stretch the time horizon, and the picture changes completely.

 

Equities Win in the Long Run

 

Over the past 10–15 years, the Nifty 50 ETFs have delivered 12–15% compounded annual returns (CAGR), while gold’s long-term CAGR hovers around 8–9%.

 

The reason is simple — companies grow earnings, pay dividends, and benefit from India’s expanding economy.

 

Gold, on the other hand, does not generate income or growth; it simply preserves value during uncertainty.

 

"At first look, it seems that gold has no rivals. However, if one lengthens the duration, the story changes. Historically, Nifty 50 ETF have generated 12-15% CAGR over 10-15 years period, while the long-term CAGR of gold hovers around 8-9%. The primary reason is in the fundamentals, companies grow earnings, pay dividends, and get benefits from the Indian economy’s expansion whereas gold, though it has always been a safe haven, has no income nor growth," said Prasenjit Paul, an equity analyst at Paul Asset and the fund manager of 129 Wealth Fund, a SEBI-registered Category III Alternative Investment Fund.

 

The Best Performer Rarely Repeats

 

• Another truth investors often forget: the best-performing asset class in one year rarely repeats the next year.
• In most market cycles, gold shines during global or geopolitical crises, but tends to lag once equity markets recover.
• There have even been 3–4 year stretches where gold prices remained stagnant or fell, especially after a strong rally.
• After gold’s sharp rise over the last two years, it’s time to be cautious. Buying at these elevated levels could lead to disappointment if prices consolidate.

 

"We have noticed that conservative investors find gold attractive due to the stability. On the contrary, aggressive investors prefer equities for their higher potential of growth. A more logical and rational choice, especially for the next year, would be a balanced strategy with higher allocation towards equity considering the fact that Gold price may consolidate

after the sharp rally over the past 2 years," said Prasenjit Paul.

 

In short: let your portfolio celebrate Diwali with both light (growth from equities) and shine (stability from gold).