What if you could almost double your historical returns without doubling portfolio volatility?
Whiteoak Capitals study has an interesting Answer
Here’s what the data shows.
Lets start with 100% Debt
Historical Average
6.76% Return
6.37% Volatility
Now add Equity and Gold
The number change significantly
55% Debt
25% Equity
20% Gold
Historical Average
11.59% Return
6.81% Volatility
Return increased by 4.83% points
Volatility Increases only 0.44% points
But it wasn’t just Gold
Whiteoak also looked at : 80% Debt + 20% Equity.
Historical Return
9.14%
Volatility
6.39%
Compare that with 100% Debt
6.76% / 6.37%
Almost the same volatility.
Then gold enters the portfolio.
55% Debt + 25% Equity + 20% Gold
Return
11.59%
Volatility
6.81%
This is where diversification starts becoming interesting
Why ?
Because these assets don’t always move together
Whiteoak Study Showed
Equity - Gold - 0.43
Debt - Equity – 0.06
*Lower correlation can help reduce overall portfolio risk.*
But diversification doesn’t eliminate volatility.
Increase Equity Further.
45% Debt
35% Equity
20% Gold
Return
12.78%
Volatility
8.71%
Higher Return
Higher Risk
That’s the important point
There's no free Lunch
But the right combination of assets.
You’ve not just choosing assets, you’ve building portfolio
And this is where Multi Asset funds become interesting.
Instead of recycling entirely on Equity you can combine
Debt + Equity + Gold
Each plays different role.
The question isn’t
“Which Asset will perform best ?”
Its
"What combination can help me to reach my return objective without taking unnecessary Risk?”
Ofcourse, these are historical results, they don’t guarantee future returns .
And the 55:25:20 allocation isn’t suitable for everyone.
Your need, horizon and risk capacity matter.
The biggest takeaway
Portfolio construction matters.
Sometimes improving the mix can matter more than chasing the highest returning Asset.
Diversification isn’t about owning more, it’s about owning differently.
Blog by Mr. Santosh G Akerkar for educational and awareness purposes only.
