WhiteOak study shows how much equity, gold and debt investors should hold

WhiteOak Capital study shows how mixing debt, equity and gold can boost long term risk adjusted returns, challenging assumptions about volatility and diversification.

By Anshul

A study by WhiteOak Capital has highlighted how combining debt, equity and gold in different proportions may improve portfolio risk-adjusted returns over the long term, challenging the common perception that adding equity always increases volatility.

The analysis, titled “Chemistry of Investing”, examined rolling one-year return data between September 2001 and April 2026 using combinations of debt, equity and gold indices. The study focused on portfolio construction trends and historical risk-return behaviour rather than making investment recommendations.

According to the study, a portfolio fully invested in debt generated an average annual return of 6.83% with volatility of 6.38% during the period under review. However, adding a small equity allocation appeared to improve returns without necessarily increasing overall volatility.

A portfolio with 90% debt and 10% equity delivered an average annual return of 8.05% while volatility declined to 5.74%, compared with the all-debt portfolio. Similarly, an 80% debt and 20% equity mix generated 9.27% returns with volatility nearly identical to the 100% debt portfolio.

The study noted that a 75% debt and 25% equity allocation produced average annual returns of 9.87% with volatility at 7.04%, suggesting that moderate exposure to equities historically improved risk-adjusted returns over long periods.

As equity allocation increased further, returns also rose, though accompanied by higher volatility. A fully equity-based portfolio generated average annual returns of 19% with volatility of 25.36%, according to the analysis.

The study used the CRISIL 10-Year Gilt Index as the debt benchmark and the BSE Sensex Total Return Index for equities.

WhiteOak Capital also analysed the impact of adding gold as a third asset class. The findings suggested that including gold in portfolios may have helped improve diversification and reduce downside risk during periods of market stress.

A portfolio comprising 55% debt, 25% equity and 20% gold delivered average annual returns of 11.61% with volatility of 6.86%, which remained close to the volatility level of a pure debt portfolio but with substantially higher returns.

Other portfolio combinations that included gold also showed comparatively lower volatility levels than equivalent equity-heavy portfolios without gold exposure.

The study observed that gold and domestic equities have historically shown varying degrees of correlation, with gold often providing downside protection during periods when equities delivered negative returns.

According to the report, combining low-correlated or negatively correlated asset classes may help investors navigate changing economic cycles and market conditions more effectively, especially when predicting the best-performing asset class becomes difficult over time.

The study added that diversified multi-asset allocation strategies could help investors pursue long-term financial goals by seeking more balanced risk-adjusted returns across market cycles.

Note To Readers

Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Readers should consult certified experts before making any investment decisions.