Gold can help improve portfolio returns without adding too much risk: WhiteOak Capital Mutual Fund

Synopsis A WhiteOak Capital Mutual Fund study shows that gold can enhance long-term portfolio returns without significantly increasing risk. By combining gold with equity and debt, investors saw higher returns and stable volatility. The analysis highlights how low correlation between asset classes helps portfolios stay balanced, even when markets move unpredictably. Gold is usually seen as a safe investment during uncertain times, but a recent study by WhiteOak Capital Mutual Fund shows that gold can do more than just act as a safety net. It can actually help improve overall portfolio returns when combined properly with equity and debt The study looked at data from September 2001 to January 2026 and compared different mixes of debt, equity and gold. It found that a portfolio invested only in debt gave average returns of 6.87% with volatility of 6.40%. Also Read | MF Tracker: Can SBI Multi Asset Allocation Fund’s 10-year consistency continue? Best MF to invest Looking for the best mutual funds to invest? Here are our recommendations. View Details » However, when gold and equity were added — for example, 55% debt, 25% equity and 20% gold — the average return increased to 11.55%, while volatility remained almost similar at 6.85%. In simple terms, returns improved a lot without taking much extra risk or about 3.08% higher compared to a 6.87% average return from a 100% bond portfolio. The study also noted that gold has often helped during periods when stock markets delivered negative returns and vice versa. Since gold, equity and debt do not always move in the same direction, combining them helps balance the portfolio. When one asset class struggles, another may support returns. Live Events “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 an optimum level of risk-adjusted return to attain their long term financial goals,” the study said. Another important finding was that adding a small portion of equity to debt did not always increase risk. A 90% bond–10% equity portfolio recorded an average return of 8.09%, compared to 6.87% for the all-debt portfolio, while volatility measured 5.75% versus 6.40% for 100% debt over the same period. In some cases, returns improved while volatility remained similar or even lower than a pure debt portfolio. However, as equity allocation increases sharply, risk also rises. Also Read | JioBlackRock Mutual Fund receives Sebi’s nod to launch largecap fund It is also notable that an 80% Bond and 20% Equity combination represents almost similar volatility as a 100% Bond portfolio on average, with a 2.45% 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. While past performance does not guarantee future returns, the study shows that gold can play an important role in building a more stable and balanced long-term portfolio. (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times) If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on ETMFqueries@timesinternet.in alongwith your age, risk profile, and Twitter handle. (Catch all the Mutual Fund News, Breaking News, Budget 2024 Events and Latest News Updates on The Economic Times.) Subscribe to The Economic Times Prime and read the ET ePaper online. ...moreless (Catch all the Mutual Fund News, Breaking News, Budget 2024 Events and Latest News Updates on The Economic Times.) Subscribe to The Economic Times Prime and read the ET ePaper online. ...moreless India seeks self-reliance in containers; but has The Great Wall to climb Jyoti Structures bankruptcy shows how revival can drag for nearly a decade How IndiGo-Air India duopoly is causing turbulence at MakeMyTrip, peers India’s post-pandemic K-shaped recovery is flattening. Here’s why Stock Radar: Aster DM Healthcare stock recovers from lows; reclaims crucial moving averages – time to buy? Buy, Sell or Hold: Motilal Oswal remains neutral on IDFC First Bank; Morgan Stanley maintains underweight on Urban Company 1 2 3