Capital Protection Fund

I came across a presentation which explained how a capital protection scheme worked. 

It's like this. The money is invested for a specified duration, say, 5 years. About 65% of the amount you invest is deployed into debt funds (fixed deposits etc) which at the end of the period will grow to the total amount you invested. Thus your capital is protected no matter what.

Now the balance amount (35% in this case) is invested in equity. Over 5 year period this can double or grow by 50% or you can lose your shirt. Any which way, the capital you invested is protected.

Now, the presentation also had made an analysis in the last 12 years of returns from investment in equity over a rolling 3 year period. There were 3000 odd data points.

I assume the data points were like:

1 Jan 1999 - 1 Jan 2002

2 Jan 1999 - 2 Jan 2002

...

30-Sep-2008 - 30-Sep-2011

You can see that its about 10 yrs (of 240 days each approx, excluding weekends and other holidays) which comes to about 2400 days.

Now coming back to what the analysis in the presentation...

It was mentioned that the investment (in equity) gave positive returns 80% of the time (of the 3000 samples) and gave negative returns 20% of the time. Meaning, if you had blindly invested in equity between 1999 and 2008 and stayed invested for 3 years, there was a 80% chance that you would make money and 20% that you would lose money.

Note:

I am not going into how much one would have profited or lost. I am assuming that it may not be an important factor in this analysis. 

Now if we change the 3 year investment period what happens to the analysis? Investment in equity is risky. One could make or lose a lot. If we reduce the investment period to 2 years then we would have made negative returns probably 40% of the time (instead of 20% of the time as in the case of 3 year lock in).

Conversely, if the lock in period was increased to 5 years, the probability of negative returns would reduce. Maybe it might only be 10% instead of 20%.

Now, if the probability of getting a negative return when we invest in equity market over 5 years is only 10% (and I assume the expected loss is about 15%) then this also is a form of capital protection. You don't lose more than 15% of your capital. While the upside in case of profit would be much higher. Right?

So my question is: why are people selling debt instruments when the investment horizon is 5 years? Why do investors buy it?

Should we not focus on (a) CAGR Returns (b) risk (c) liquidity while making an investment and choose whichever product/instrument which meets our goals. Whether its gold or silver or real estate or sectoral funds or stocks or equity funds or debt funds or balanced funds etc? Why do we compare each asset class with its own benchmark? Should we not instead compare across asset classes using the common parameters like the three mentioned above?