This data from DSP Netra beautifully highlights how multi-asset portfolios can smoothen your investment journey and deliver strong long-term performance. The chart compares four lines: the S&P 500 (in INR), Gold (in INR), Nifty 50 Total Return Index, and a combined portfolio of all three.
Performance Comparison
Individually, each asset has had phases of underperformance. There have been 10-year periods where S&P 500 gave -2%, Gold gave -3%, and Nifty gave only 5% annualized returns. But the combined portfolio still delivered 10% CAGR in the same periods.
On the higher side, maximum 10-year rolling returns were: S&P 500: 23%, Gold: 21%, Nifty: 22%, Combined portfolio: 20%
So while each asset had its own highs and lows, the combined strategy ensured consistently strong returns.
Lower Volatility, Better Journey
Volatility (standard deviation) also reduced significantly. Individually, S&P, Gold, and Nifty had volatilities of 19%, 17%, and 22% respectively. But the combined portfolio brought this down to just 13% – making the return journey much smoother and less stressful.
Why This Works
The key here is correlation – or rather, the lack of it. These asset classes don’t always move together. For example, when Nifty is falling, Gold might be rising. Or S&P might be flat while Nifty is rising. These counter-movements help cushion the overall portfolio, reducing drawdowns and enhancing returns.
Momentum Twist for Extra Edge
Even more interestingly, if we apply a momentum-based approach – allocating more to the assets showing strength and less to those lagging – we can possibly enhance this further.
WeekendInvesting launches – Portfolio Momentum Report
Momentum Score: See what percentage of your portfolio is in high vs. low momentum stocks, giving you a snapshot of its performance and health.
Weightage Skew: Discover if certain stocks are dominating your portfolio, affecting its performance and risk balance.
Why it matters
Weak momentum stocks can limit your gains, while high momentum stocks improve capital allocation, enhancing your chances of superior performance.
