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.
Bu hikaye THE WEEK India dergisinin December 08, 2024 sayısından alınmıştır.
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Bu hikaye THE WEEK India dergisinin December 08, 2024 sayısından alınmıştır.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Giriş Yap
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