Oct. 18: It has been a dog year for stocks — and investors have had a white-knuckle ride on a roller-coaster that’s gone into a deep dive since January.

So, investors will probably blanch when they hear that equity is still king when you make a slightly longer-term assessment of returns across different asset classes.

If you had bought Reliance Industries three years ago, you would be in clover today. The stock — which has the highest weightage in the sensex — has leapt 69 per cent since October 2005.

But that isn’t all: after the demerger of the company in January 2006, investors also got shares in the four companies that went to younger scion Anil Ambani. If you tot up those returns as well, it would rate as a multi-bagger investment.

The smart money would have also gone into Bharti Airtel and HDFC — the top plays in telecom and housing finance. Surprisingly, the bets on ICICI Bank and Infosys would not have paid off.

The lesson here is this: pick frontline stocks carefully and hang on to them for a while to realise the gains. It’s a simple adage but hard to follow when the markets go into a downswing as they have now.

We have analysed the value of Rs 1 lakh invested on October 17, 2005 across various asset classes — shares of companies, equity mutual funds, bank fixed deposits, and precious metals. “If history is any guide, equities have outperformed all asset classes over a period of time,” says Hitesh Agarwal, head of research at Angel Broking.

If you leave out the Reliance pack and Bharti Airtel, gold would have given the highest returns while bank fixed deposits — the refuge of the timid during the current turmoil — have yielded the poorest gains. “Gold prices on the international market rose sharply from 2005 after the dollar tumbled against all major currencies. Investors in the developed markets lapped up gold because it served as a hedge against the declining value of the dollar as well as rising inflation,” said an investment analyst.

However, gold has a long history of weak returns and always perks up during a crisis; once the fear of global recession recedes, gold prices — which peaked in Calcutta at Rs 14,565 per 10gm on October 10 — will start to head downwards.

Mutual funds have been showing weak one-year returns after the slide in stock values. But over a three-year horizon, which is the best medium-term perspective, several schemes are yielding more than 20 per cent.

Agarwal is confident that history will repeat itself — and equity will come out a winner in the long run. But till then, batten those hatches.