{"id":8025,"date":"2025-01-01T11:14:49","date_gmt":"2025-01-01T11:14:49","guid":{"rendered":"https:\/\/navia.co.in\/blog\/?p=8025"},"modified":"2025-06-17T07:42:53","modified_gmt":"2025-06-17T07:42:53","slug":"crack-code-smarter-investing-risk-adjusted-return","status":"publish","type":"post","link":"https:\/\/navia.co.in\/blog\/crack-code-smarter-investing-risk-adjusted-return\/","title":{"rendered":"Crack the Code to Smarter Investing: Unlock Better Risk-Adjusted Returns"},"content":{"rendered":"\n<div class=\"wp-block-rank-math-toc-block\" id=\"rank-math-toc\"><nav><ul><li class=\"\"><a href=\"#1-adding-equity-doesnt-always-increase-volatility\">1. Adding Equity Doesn\u2019t Always Increase Volatility<\/a><\/li><li class=\"\"><a href=\"#2-impact-of-adding-gold-as-a-third-asset-class\">2. Impact of Adding Gold as a Third Asset Class<\/a><\/li><li class=\"\"><a href=\"#3-asset-class-correlations\">3. Asset Class Correlations<\/a><\/li><li class=\"\"><a href=\"#4-calendar-year-wise-asset-class-performance\">4. Calendar Year-Wise Asset Class Performance<\/a><\/li><li class=\"\"><a href=\"#5-sample-multi-asset-portfolio-performance-2011-2024\">5. Sample Multi-Asset Portfolio Performance (2011-2024)<\/a><\/li><\/ul><\/nav><\/div>\n\n\n\n<p>Smarter investing starts with the right strategy, and it helps you <strong>crack the code to smarter investing<\/strong> while <strong>unlocking better risk-adjusted returns<\/strong>. By <a href=\"https:\/\/navia.co.in\/blog\/grow-your-wealth-with-navia-readymade-etf-baskets\/\" data-type=\"post\" data-id=\"605\">diversifying your portfolio<\/a> with equities, debt, and gold, you can boost returns, minimize risk, and navigate market uncertainties with confidence. Let\u2019s explore how.<\/p>\n\n\n\n<iframe class=\"custom-video\" src=\"https:\/\/www.youtube.com\/embed\/lTz2DXwFONc?si=JZhdZpzm6lg2p4_d\" title=\"YouTube video player\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-b4cc3cd593655cbf33bd3904a2416e73\" id=\"1-adding-equity-doesnt-always-increase-volatility\" style=\"color:#053f54\"><strong>1. Adding Equity Doesn\u2019t Always Increase Volatility<\/strong><\/h2>\n\n\n\n<p><strong>\ud83d\udd38<\/strong> It is a common belief that adding equity to a bond portfolio increases portfolio risk. However, this isn\u2019t always the case.<\/p>\n\n\n\n<p><strong>\ud83d\udd38<\/strong> <strong>Example: <\/strong>A 100% bond portfolio delivered an average return of <strong>7.1%<\/strong> with a volatility of <strong>6.9%<\/strong>. By adding <strong>10% equity<\/strong>, returns improved to <strong>8.1%<\/strong>, while volatility reduced to <strong>6.0%<\/strong>.<\/p>\n\n\n\n<p><strong>\ud83d\udd38<\/strong> A portfolio with <strong>75% bonds and 25% equity<\/strong> maintained <strong>6.9% volatility<\/strong> but boosted returns to <strong>9.7%<\/strong>, clearly demonstrating <a href=\"https:\/\/navia.co.in\/blog\/risk-management-strategies-for-day-traders\/\" data-type=\"post\" data-id=\"2929\">improved risk-adjusted <\/a>returns.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><thead><tr><td><strong><mark style=\"background-color:rgba(0, 0, 0, 0);color:#ec4d37\" class=\"has-inline-color\">Portfolio Composition<\/mark><\/strong><\/td><td><strong><mark style=\"background-color:rgba(0, 0, 0, 0);color:#ec4d37\" class=\"has-inline-color\">Average Return (%)<\/mark><\/strong><\/td><td><strong><mark style=\"background-color:rgba(0, 0, 0, 0);color:#ec4d37\" class=\"has-inline-color\">Volatility (%)<\/mark><\/strong><\/td><\/tr><\/thead><tbody><tr><td>100% Debt, 0% Equity<\/td><td>7.1<\/td><td>6.9<\/td><\/tr><tr><td>90% Debt, 10% Equity<\/td><td>8.1<\/td><td>6.0<\/td><\/tr><tr><td>80% Debt, 20% Equity<\/td><td>9.2<\/td><td>6.3<\/td><\/tr><tr><td>75% Debt, 25% Equity<\/td><td>9.7<\/td><td>6.9<\/td><\/tr><tr><td>70% Debt, 30% Equity<\/td><td>10.3<\/td><td>7.7<\/td><\/tr><tr><td>50% Debt, 50% Equity<\/td><td>12.6<\/td><td>12.2<\/td><\/tr><tr><td>0% Debt, 100% Equity<\/td><td>18.9<\/td><td>26.4<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-90bb471de58f135a746561cc5188d9a6\" id=\"2-impact-of-adding-gold-as-a-third-asset-class\" style=\"color:#053f54\"><strong>2. Impact of Adding Gold as a Third Asset Class<\/strong><\/h2>\n\n\n\n<p><strong>\ud83d\udd38<\/strong> <a href=\"https:\/\/navia.co.in\/open-commodities-trading-account\">Gold<\/a> has historically shown a <strong>negative correlation<\/strong> with equity and debt, making it a valuable diversifier.<\/p>\n\n\n\n<p><strong>\ud83d\udd38<\/strong> A portfolio with <strong>55% Debt, 25% Equity, and 20% Gold<\/strong> maintained a similar volatility of <strong>6.9%<\/strong> while boosting returns to <strong>11.1%<\/strong>, a significant improvement from the <strong>7.1%<\/strong> of a pure debt portfolio.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><thead><tr><td><strong><mark style=\"background-color:rgba(0, 0, 0, 0);color:#ec4d37\" class=\"has-inline-color\">Portfolio Composition (Equity\/Debt\/Gold)<\/mark><\/strong><\/td><td><strong><mark style=\"background-color:rgba(0, 0, 0, 0);color:#ec4d37\" class=\"has-inline-color\">Average Return (%)<\/mark><\/strong><\/td><td><strong><mark style=\"background-color:rgba(0, 0, 0, 0);color:#ec4d37\" class=\"has-inline-color\">Volatility (%)<\/mark><\/strong><\/td><\/tr><\/thead><tbody><tr><td>80% Debt, 0% Equity, 20% Gold<\/td><td>8.4<\/td><td>6.5<\/td><\/tr><tr><td>70% Debt, 10% Equity, 20% Gold<\/td><td>9.5<\/td><td>5.7<\/td><\/tr><tr><td>60% Debt, 20% Equity, 20% Gold<\/td><td>10.6<\/td><td>6.2<\/td><\/tr><tr><td>55% Debt, 25% Equity, 20% Gold<\/td><td>11.1<\/td><td>6.9<\/td><\/tr><tr><td>40% Debt, 40% Equity, 20% Gold<\/td><td>12.8<\/td><td>9.9<\/td><\/tr><tr><td>0% Debt, 80% Equity, 20% Gold<\/td><td>17.8<\/td><td>21.0<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-e32e64bca2ea1fd8652dec322310fdea\" id=\"3-asset-class-correlations\" style=\"color:#053f54\"><strong>3. Asset Class Correlations<\/strong><\/h2>\n\n\n\n<p>Different asset classes show unique correlations, which are crucial for building a well-balanced portfolio:<\/p>\n\n\n\n<p><strong>\ud83d\udd38<\/strong> <strong>Indian Equity vs. Gold:<\/strong> <strong>-0.53<\/strong> (strong negative correlation)<\/p>\n\n\n\n<p><strong>\ud83d\udd38<\/strong> <strong>Debt vs. Gold:<\/strong> <strong>+0.06<\/strong> (near zero, meaning they move independently)<\/p>\n\n\n\n<p><strong>\ud83d\udd38<\/strong> <strong>US Equity vs. Indian Equity:<\/strong> <strong>+0.40<\/strong> (moderate positive correlation)<\/p>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-4e9e2a7a2f3638625d75318975b2e790\" id=\"4-calendar-year-wise-asset-class-performance\" style=\"color:#053f54\"><strong>4. Calendar Year-Wise Asset Class Performance<\/strong><\/h2>\n\n\n\n<p>Asset class performance varies yearly. <strong>For example:<\/strong><\/p>\n\n\n\n<p><strong>\ud83d\udd38<\/strong> In <strong>2020<\/strong>, Nasdaq delivered <strong>48.6%<\/strong>, while Indian Equity returned <strong>16.1%<\/strong>, and Gold surged by <strong>28%<\/strong>.<\/p>\n\n\n\n<p><strong>\ud83d\udd38<\/strong> In <strong>2022<\/strong>, when Indian Equity grew only by <strong>5.7%<\/strong>, Gold provided a <strong>13.9%<\/strong> return, showcasing its defensive nature during tough equity market phases.<\/p>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-fd6d35156e73267bc5ec2ad28f78d1af\" id=\"5-sample-multi-asset-portfolio-performance-2011-2024\" style=\"color:#053f54\"><strong>5. Sample Multi-Asset Portfolio Performance (2011-2024)<\/strong><\/h2>\n\n\n\n<p>A hypothetical portfolio with <strong>25% Equity, 45% Debt, 25% Gold, and 5% US Equity<\/strong> delivered a <strong>10.7% CAGR<\/strong> over 13 years, better balancing returns and volatility than any single asset class.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><thead><tr><td><strong><mark style=\"background-color:rgba(0, 0, 0, 0);color:#ec4d37\" class=\"has-inline-color\">Financial Year<\/mark><\/strong><\/td><td><strong><mark style=\"background-color:rgba(0, 0, 0, 0);color:#ec4d37\" class=\"has-inline-color\">Indian Equity (BSE Sensex TRI)<\/mark><\/strong><\/td><td><strong><mark style=\"background-color:rgba(0, 0, 0, 0);color:#ec4d37\" class=\"has-inline-color\">Debt (CRISIL Short-Term Bond)<\/mark><\/strong><\/td><td><strong><mark style=\"background-color:rgba(0, 0, 0, 0);color:#ec4d37\" class=\"has-inline-color\">Gold (MCX)<\/mark><\/strong><\/td><td><strong><mark style=\"background-color:rgba(0, 0, 0, 0);color:#ec4d37\" class=\"has-inline-color\">US Equity (S&amp;P 500 INR)<\/mark><\/strong><\/td><td><strong><mark style=\"background-color:rgba(0, 0, 0, 0);color:#ec4d37\" class=\"has-inline-color\">Sample Multi-Asset Portfolio<\/mark><\/strong><\/td><\/tr><\/thead><tbody><tr><td>2011<\/td><td>12.5%<\/td><td>5.1%<\/td><td>27.4%<\/td><td>14.7%<\/td><td>13.0%<\/td><\/tr><tr><td>2020<\/td><td>-22.9%<\/td><td>9.9%<\/td><td>29.7%<\/td><td>1.1%<\/td><td>6.2%<\/td><\/tr><tr><td>2021<\/td><td>69.8%<\/td><td>7.8%<\/td><td>7.3%<\/td><td>51.8%<\/td><td>25.4%<\/td><\/tr><tr><td>2024<\/td><td>26.5%<\/td><td>7.6%<\/td><td>12.5%<\/td><td>33.5%<\/td><td>14.8%<\/td><\/tr><tr><td><strong>CAGR (2011-2024)<\/strong><\/td><td><strong>12.3%<\/strong><\/td><td><strong>7.7%<\/strong><\/td><td><strong>10.6%<\/strong><\/td><td><strong>18.6%<\/strong><\/td><td><strong>10.7%<\/strong><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>This study highlights the importance of combining <strong>multiple asset classes<\/strong> such as<a href=\"https:\/\/navia.co.in\/equity\"> <strong>equity<\/strong><\/a><strong>, debt, and gold<\/strong>. By diversifying into non-correlated or negatively correlated assets, investors can <strong>reduce volatility<\/strong> and <strong>enhance returns<\/strong>. This strategic allocation serves as a robust defense against market uncertainties, ensuring better <strong>risk-adjusted performance<\/strong> over time.<\/p>\n\n\n\n<p>The data and insights presented are derived from the <a href=\"https:\/\/mf.whiteoakamc.com\/learning-edge\/insight\/chemistry_of_investing\">report<\/a> published by WhiteOak Capital Mutual Fund (April 2024). The study analyzes historical returns, volatility, and correlations across various asset classes, including Indian equity, debt, gold, and US equity, over multiple financial years.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><a href=\"https:\/\/open.navia.co.in\/\"><img fetchpriority=\"high\" decoding=\"async\" width=\"1024\" height=\"149\" src=\"https:\/\/navia.co.in\/blog\/wp-content\/uploads\/2024\/12\/image-15-1024x149.png\" alt=\"Navia- demat account\" class=\"wp-image-7790\" srcset=\"https:\/\/navia.co.in\/blog\/wp-content\/uploads\/2024\/12\/image-15-1024x149.png 1024w, https:\/\/navia.co.in\/blog\/wp-content\/uploads\/2024\/12\/image-15-300x44.png 300w, https:\/\/navia.co.in\/blog\/wp-content\/uploads\/2024\/12\/image-15-150x22.png 150w, https:\/\/navia.co.in\/blog\/wp-content\/uploads\/2024\/12\/image-15-768x112.png 768w, https:\/\/navia.co.in\/blog\/wp-content\/uploads\/2024\/12\/image-15.png 1028w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/a><\/figure>\n\n\n\n<p>The report highlights key portfolio strategies such as multi-asset diversification, optimal portfolio construction, and the impact of varying asset allocations on returns and volatility. These findings underscore the significance of a <a href=\"https:\/\/navia.co.in\/blog\/category\/investments\/\">well-diversified investment<\/a> approach to balance risk and returns effectively.<\/p>\n\n\n\n<p class=\"has-text-align-center\"><strong>Do You Find This Interesting?<\/strong><\/p>\n\n\n\n<div class=\"wp-block-group is-nowrap is-layout-flex wp-container-core-group-is-layout-ad2f72ca wp-block-group-is-layout-flex\">\n<p>We\u2019d Love to Hear from you-<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><a href=\"https:\/\/form.typeform.com\/to\/bpQ8ZlDc\"><img decoding=\"async\" width=\"300\" height=\"86\" src=\"https:\/\/navia.co.in\/blog\/wp-content\/uploads\/2024\/12\/image-18.png\" alt=\"\" class=\"wp-image-8048\" srcset=\"https:\/\/navia.co.in\/blog\/wp-content\/uploads\/2024\/12\/image-18.png 300w, https:\/\/navia.co.in\/blog\/wp-content\/uploads\/2024\/12\/image-18-150x43.png 150w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/><\/a><\/figure>\n<\/div>\n\n\n\n<p><strong>DISCLAIMER: Investments in the securities market are subject to market risks, read all the related documents carefully before investing. The securities quoted are exemplary and are not recommendatory. Brokerage will not exceed the SEBI prescribed limit.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Smarter investing starts with the right strategy, and it helps you crack the code to smarter investing while unlocking better risk-adjusted returns. By diversifying your portfolio with equities, debt, and gold, you can boost returns, minimize risk, and navigate market uncertainties with confidence. Let\u2019s explore how. 1. Adding Equity Doesn\u2019t Always Increase Volatility \ud83d\udd38 It [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":8096,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[422,11,7,21,22,53,424,423,32],"class_list":["post-8025","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investments","tag-crack-the-code","tag-financial-goals","tag-indian-stock-markets","tag-investments","tag-investor","tag-marketperformance","tag-risk-adjusted-returns","tag-smarter-investing","tag-wealth-creation"],"featured_image_src":"https:\/\/navia.co.in\/blog\/wp-content\/uploads\/2025\/01\/Crack-the-Code.png","author_info":{"display_name":"Navia Markets","author_link":"https:\/\/navia.co.in\/blog\/author\/tradeplusonline\/"},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/navia.co.in\/blog\/wp-json\/wp\/v2\/posts\/8025","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/navia.co.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/navia.co.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/navia.co.in\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/navia.co.in\/blog\/wp-json\/wp\/v2\/comments?post=8025"}],"version-history":[{"count":24,"href":"https:\/\/navia.co.in\/blog\/wp-json\/wp\/v2\/posts\/8025\/revisions"}],"predecessor-version":[{"id":10873,"href":"https:\/\/navia.co.in\/blog\/wp-json\/wp\/v2\/posts\/8025\/revisions\/10873"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/navia.co.in\/blog\/wp-json\/wp\/v2\/media\/8096"}],"wp:attachment":[{"href":"https:\/\/navia.co.in\/blog\/wp-json\/wp\/v2\/media?parent=8025"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/navia.co.in\/blog\/wp-json\/wp\/v2\/categories?post=8025"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/navia.co.in\/blog\/wp-json\/wp\/v2\/tags?post=8025"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}