In global markets, the Nasdaq Composite and S&P 500 have demonstrated stellar performance. The Nasdaq Composite, heavily weighted towards technology stocks, provided a 34.3% YTD annualized return and a 22.5% five-year return. This was a special year as Nvidia became a $3.6 Tn market cap stock rising to new highs on a quarter on quarter basis and all other magnificent stocks chipping in (from Meta's transformation to Apple to Amazon to Tesla).
Bitcoin, the most well-known cryptocurrency, has shown extraordinary returns, with a staggering 149.2% YTD return and a 42.3% five-year annualized return. However, it is crucial to understand that cryptocurrencies are extremely volatile and speculative.
Pros:
• Provided massive returns
• Growing acceptance and integration into financial systems
• Decentralized nature, reducing the risk of government intervention
Cons:
• Extreme volatility and high risk
• Regulatory uncertainty
• Security risks, such as hacking and fraud
• No underlying asset
Precious metals like Gold and Silver are considered safe-haven assets. Gold has delivered a 22.1% YTD return and a 14.5% five-year return. Silver, while slightly less stable, has provided a 21.9% YTD return and a 7.4% five-year return. These metals are often sought after during economic uncertainty as they tend to retain value better than other investments.
Each asset class offers a unique balance of risk and reward. Indian and US Equities provide high returns but come with high volatility. Cryptocurrencies offer massive potential returns but at the cost of extreme risk. Precious metals offer stability and protection but usually deliver lower returns.
Investors should consider their risk tolerance, investment goals, and time horizon when choosing asset classes. Diversification across different asset classes can help mitigate risk and enhance returns, ensuring a more balanced and resilient investment portfolio.
Malay Shah is a Founder and a Principal Advisor at CrispIdea (www.crispidea.com/ai-first-wealth). He is a SEBI registered Investment Adviser with more than 24 years of work experience with professional services firms like EY, McKinsey, Alvarez & Marsal bringing in a wealth of knowledge about market trends, economic cycles, and investment strategies.
He is on a mission to democratize wealth for the ambitious professionals in India by bringing the best AI technology combined with powerful capabilities of large fund-houses and financial institutions to retail clients, ensuring capital protection, tax-optimized asset allocation, and market outperformance
