Here are twelve such myths:
1) Gold is dead money and cannot beat stocks
The widespread view that gold is a useless ‘pet rock’ that always follows stocks is belied by 21st century data, where bullion has actually outperformed all major stock markets in terms of local currencies, including India and the US. In India, only about a quarter of NSE 500 stocks have beaten gold on a market cap-weighted basis over this period, making a zero gold allocation look more like a bias than a rational decision.
2) Gold has replaced stocks as the only asset worth owning
The converse belief, that gold is now the only game in town, also fails the data test, as five-year rolling returns show that stocks in India and the US beat gold about half the time, and more often in Europe and Hong Kong. It took a long time before investing in diversified indices would have delivered better results than holding gold alone. This reinforced the fact that gold bullion is a useful diversifier and not a one-way ticket to riches.
3) Diversification dilutes returns and is ‘di-worse-ification’
The claim that spreading money across assets negatively impacts performance is challenged by DSP’s backtests showing that a 50–20–15–15 mix of domestic equities, debt, international equities and gold delivers equity-like returns with much lower volatility in the markets. Outside the US, this diversified basket has even beaten pure local equities in nominal terms over 20 years, with a significantly lower standard deviation in countries such as India and China.
4) High GDP growth automatically means high stock returns
Investors often assume that fast-growing economies will automatically generate high stock returns, but 30 years of inflation-adjusted data show several fast-growing markets, including Malaysia, Indonesia, the Philippines and China, where real stock returns have lagged behind real GDP growth or even turned negative. Stock markets ultimately reflect earnings growth, capital allocation and governance, and these can decouple from overall GDP when shocks, policy mistakes or dilution offset macro strength.
5) India can realistically grow to a $30 trillion economy by 2050
The popular projection that India will be a $30 trillion economy by 2050 assumes a CAGR of 8.9% of real GDP over 25 years, a pace that the country has almost never maintained even over shorter periods. With long-term real growth closer to 6% and only one five-year period ending in FY08 approaching the required trajectory, DSP argues that a more plausible outcome is closer to $20 trillion, even under optimistic assumptions of a doubling per decade.
6) Relentless domestic and foreign flows make markets one-way
Another reassuring idea is that abundant domestic SIP funds and foreign inflows guarantee an up-only market, but flow data on large-, mid- and small-cap funds shows that fund flows tend to rise after strong returns and fade when performance weakens. Even with the huge cumulative inflows of FII and DII in recent years, markets have often stalled or corrected, illustrating that flows generally follow rather than dictate returns.
7) The best performing funds will remain top performers
Many investors assume that recent winners will continue to win, but DSP’s quartile analysis between 2013 and 2025 shows that 60% to 80% of schemes in the top quartile over a three-year period have slid into lower quartiles over the next three years, with some cohorts seeing a 100% failure rate. This makes extrapolating from a fund CAGR of 20% to a “safe” future return of 15% to 18% a risky shortcut given the competition, style cycles and mean reversion.
8) Index targets provide a reliable map for the year ahead
The ritual of setting Nifty and S&P 500 targets is seen as a vital guideline, but over the past 25 years, the average S&P 500 forecast for a year ahead has never been negative, even as seven of those years ended. End targets for both indices regularly lag actual outcomes by more than 10% in either direction, especially near peaks and troughs, demonstrating that these reflect the prevailing mood more than any sustainable lead.
9) Starting the valuation does not matter if you are working in the long term
A popular reassurance is that entry valuations are irrelevant over long periods of time, but Sensex versus debt charts across cycles show that buying at extreme price-to-earnings ratios can cause investors to underperform simple debt for a decade or more. In the early 1990s peaks and post-2007, stock buyers essentially endured bond-like returns with stock-like volatility, undermining the idea that time in the market always saves expensive entries.
10) Small and midcaps always outperform largecaps
The idea that small- and mid-cap stocks inherently deliver superior long-term returns is complicated by DSP’s cycle analysis, which shows that SMIDs generate massive alpha during upswings and give up most of it during subsequent downturns. The two-year rolling alpha charts for mid- and small-cap indices against the Sensex swing from sharply positive to sharply negative, indicating that their dominance is cyclical and not permanent.
11) Higher risk always guarantees higher returns
The cliché that more risk necessarily means more return is challenged by low and high beta portfolios, as well as low and high volatility portfolios built from NSE data since 2007, where low beta and low volatility baskets actually delivered higher returns. These lower-risk portfolios also experienced smaller declines than their high-beta, high-volatility counterparts, consistent with global evidence that controlling negative effects is key to compounding.
12) The success of a SIP depends a lot on when you start
Finally, investors often worry that starting an SIP at market highs will wipe out their returns, but Nifty 500 data on seven-year rolling SIPs starting at all-time highs, after 20% rallies and after 20% corrections, shows that median returns are within about one percentage point of each other, around the low teens. For disciplined investors who stay invested over a meaningful horizon, the precise starting level is much less important than the consistency and time in the plan.Bringing these threads together, DSP’s NETRA deck argues that the real benefit of today’s market lies not in finding the perfect forecast for gold, Nifty or GDP, but in breaking seductive narratives with data, respecting valuations, diversifying wisely and cutting out excess noise that has become toxic for many investors.
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(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)
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