20-year data shows 100% equity portfolios carry higher volatility

Livemint reports that while a 100% equity portfolio delivered higher absolute returns over 20 years, it also carried significantly higher volatility. Data from UTI Mutual Fund shows the Nifty 100 TRI returned 12.5% annually over two decades, turning Rs 1 lakh into about Rs 10.5 lakh. In contrast, a 50:50 equity-debt mix returned 10.9% annually, growing the same amount to Rs 7.9 lakh, while a 100% fixed-income portfolio returned 7.2% and grew to Rs 4 lakh.

However, on a risk-adjusted basis, measured as CAGR divided by standard deviation, the 100% equity portfolio scored just 0.60 over 20 years, compared with 1.0 for the 50:50 portfolio and 2.2 for 100% fixed income. The equity portfolio's standard deviation was 20.9%, far higher than 10.3% for the balanced portfolio and 3.2% for debt. Livemint notes that risk-adjusted measures show returns alone give an incomplete picture of long-term performance.