A WhiteOak Capital study of 25 years of data found that adding 10% equity to a debt portfolio actually reduced volatility. Gold further enhanced risk-adjusted returns.
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A new study from WhiteOak Capital Mutual Fund challenges the assumption that adding equity to a portfolio always raises risk. The analysis of rolling one-year returns from September 2001 to June 2026 found that a modest equity allocation can improve returns without increasing volatility – and in some cases actually reduces it.
A pure debt portfolio, using the Crisil 10 Year Gilt Index, delivered an average annual return of 6.79% with volatility of 6.38%. Adding 10% equity – via the BSE Sensex TRI – raised the average return to 7.99%, while volatility dropped to 5.76%, the study found. An 80% debt, 20% equity mix returned 9.20% with volatility matching the pure debt portfolio.
Gold further altered the risk-return profile. Because gold has a low or negative correlation with both equity and debt, including it can dampen overall portfolio swings. A portfolio of 55% debt, 25% equity, and 20% gold generated an average annual return of 11.60% with volatility close to the pure debt figure, according to the study. The combination of 70% debt, 10% equity, and 20% gold produced the lowest volatility of all mixes analysed, at 5.52%, while returning 9.79%.
At the other extreme, a 100% equity portfolio yielded the highest average return of 18.82% but with volatility of 25.35%.
The data suggests that a judicious mix of low-correlation assets can improve risk-adjusted returns. The study covered the period from September 2001 through June 2026.
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