A low-variance portfolio—where the returns over a long period of time do not move too much away from the expected mean—is critical for goals such as retirement where we project long-term corpus requirements.
Averages often do not convey the full picture on several aspects, more so in the case of investments. Thus, the journey in delivering an average return of, say, 12 per cent over 10 years, has several periods when returns significantly deviate from the expected mean, both on the upside and downside. This variance indicates portfolio volatility.
Heightened risk-taking brings variance to the fore
Investor exuberance: Pre-Covid, investors typically had allocations to equity, debt, hybrid and gold funds so as to ensure a balanced portfolio. In the past few years, investor portfolios have gone heavily (almost entirely) in favour of equities with huge weightages to mid and small caps. This has skewed the risk-reward equation.
Denne historien er fra December 08, 2024-utgaven av THE WEEK India.
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Denne historien er fra December 08, 2024-utgaven av THE WEEK India.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.
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Superman bites the dust
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OLD MAN AND THE SEA
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THE INDIAN STOCK MARKET has delivered a strong 11 per cent CAGR over the past decade, with positive returns for eight straight years.
Investing in actively managed low-volatility portfolios keeps risks at bay
AFTER A ROARING bull market over the past year, equity markets in the recent months have gone into a correction mode as FIIs go on a selling spree. Volatility has risen and investment returns are hurt.
