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WhiteOak Capital Mutual Fund’s “Chemistry of Investing” study examines how combinations of debt, equity and gold have historically influenced portfolio risk and return outcomes. The analysis aims to shed light on structural aspects of portfolio design rather than make specific investment recommendations.

Does Adding Equity Always Increase Risk?

Adding Equity ≠ Adding Volatility Always

The study evaluates rolling one-year return data from September 2001 to August 2026. Over this period, that a 100% bond portfolio has delivered an average return of 6.76% with a volatility of 6.37%; by adding 10% equity, volatility reduces to 5.76%, and the average return improves by 1.19%.

It is also notable that an 80% Bond and 20% Equity combination represent similar volatility as a 100% Bond portfolio on average with 2.38% higher return measured for 1-year of the average volatility (standard deviation) and average return observations. Which means the asset allocation portfolio has delivered better risk-adjusted return than a 100% Bond Portfolio.

D = Debt (Crisil 10 Year Gilt Index), E = Equity (BSE Sensex TRI). Source: MFIE, Bloomberg and Internal Research of WhiteOak Capital. ^Average 1 Year rolling return on daily basis and Standard Deviation (Volatility) of the return for various combination of Equity and Debt for the period September 2001 to April 2026 is considered for above analysis. The above factual data analysis is only to understand the concept of Multi Asset Allocation. Past performance may or may not be sustained in future and is not a guarantee of any future returns.

Adding Gold as a Third Asset Class

Introducing a third asset class can alter return-volatility dynamics. The portfolio with 25% Equity, 20% Gold, and 55% Bond has exhibited volatility of 6.81% which is similar as the 100% Bond Portfolio, with an average return of 11.59% (i.e., about 2.97% higher compared to a 6.76% average return from 100% Bond Portfolio).

This clearly shows that adding a judicious combination of Low Correlated, No Correlated, and Negatively Correlated Growing Asset Classes can achieve a superior risk-adjusted return on the portfolio level.

D = Debt (Crisil 10 Year Gilt Index), E = Equity (BSE Sensex TRI), G = Gold (MCX Gold INR). Source: MFIE, Bloomberg and Internal Research of WhiteOak Capital. ^Average 1 Year rolling return on daily basis and Standard Deviation (Volatility) of the return for various combination of Equity, Debt and Gold for the period September 2001 to April 2026 is considered for above analysis. The above factual data analysis is only to understand the concept of Multi Asset Allocation. Past performance may or may not be sustained in future and is not a guarantee of any future returns.

Gold has provided some downside protection in many of the years when Domestic Equity has delivered negative returns and vice versa. Various Asset Classes have varied Degree of Correlation with each other. Economic Cycles and Markets across the globe are very dynamic and it is not possible to consistently time the winning asset class, but a right mix of these asset classes may help investors achieve optimum level of risk adjusted return to attain their long-term financial goals.

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