According to FundsIndia’s analysis, a portfolio invested entirely in equities delivered an annualised return of 11% over 20 years, with a maximum drawdown of 59.5%. In comparison, a portfolio holding 70% equities, 15% debt and 15% gold generated a higher annualised return of 12.3%, while its maximum drawdown was lower at 29.2%.
The comparison suggests that combining asset classes can improve the historical risk-return profile of a portfolio. The mixed portfolio returned 1.3 percentage points more annually while experiencing a maximum drawdown that was roughly half that of the all-equity portfolio.
Maximum drawdown measures the largest peak-to-trough decline in portfolio value during the period studied. It helps investors understand how severe a temporary loss could become before a portfolio recovers. A lower maximum drawdown can make it easier for investors to remain invested through market turbulence, although it does not eliminate the possibility of losses.
Why gold and debt may help
The benefit comes from holding assets that do not always respond to market conditions in the same way. Equities are exposed to corporate earnings, valuations and economic growth. Debt investments can provide a relatively stable component, depending on their credit quality and interest-rate sensitivity. Gold can offer diversification, although its prices can also fall sharply.
When equity markets decline, gains or smaller losses in other portfolio components may cushion the overall impact. The extent of that protection depends on how each asset performs during the specific downturn; neither gold nor debt is guaranteed to rise when stocks fall.
Does a higher allocation to gold and debt always work better?
Not necessarily. FundsIndia’s comparisons show that portfolio outcomes vary with the allocation mix. A portfolio with more debt and gold may experience smaller drawdowns, but it can also participate less in an equity-market rally. The right balance depends on an investor’s time horizon, liquidity needs, financial goals and ability to tolerate losses.
The report’s historical comparisons also assume periodic portfolio rebalancing. In its analysis covering January 2000 to September 2026, allocations were rebalanced annually when the portfolio weights deviated by more than five percentage points from their targets. Actual investor outcomes can differ because of costs, taxes, investment timing and the instruments selected.
What investors should take away
The key lesson is that portfolio construction involves more than choosing the asset with the highest recent return. Combining equities with debt and gold can help spread risk across different sources of return and potentially reduce the depth of losses during difficult markets.
However, the historical figures should not be interpreted as a promise that a 70:15:15 portfolio will outperform equities or limit future drawdowns to 29.2%. Investors should select an allocation that fits their financial objectives and review it periodically, rather than changing their portfolio in reaction to every market correction.