My Mom always says “Don’t put all the eggs in one basket “… Is she right ?

We are used to hearing this cliché comment “Don’t put all the eggs in one basket”. Does this cliché really makes sense when it comes to financial markets? Have you ever realized the benefits of having different baskets for your hard earned eggs ? Let’s try to figure that out through some analysis.

I would like to highlight the benefits of allocating a portion of investments to gold and international portfolio rather than putting everything in Indian Equity market. Generally investors have a tendency to confine themselves to gold and domestic equity due to home bias or lack of awareness.

For the analysis I am taking the following three instruments.

1)Nifty 50for (Domestic equity)

2)Nasdaq-100(for International equity)

3)Nippon Gold BeEs(for gold).

ETFs and Index mutual funds are available in the market today for investors to capture the returns provided by Nifty 50 and Nasdaq100. Nifty BeEs and Motilal Oswal Nasdaq 100 are ETFs that track Nifty50 and Nasdaq 100 respectively. Gold BeEs tracks the movement of domestic gold prices.

The asset allocation to the above instruments is as follows

50% Nifty BeEs

25% Nasdaq100 ETF

25% Gold BeEs.

Please take a moment to appreciate the higher return given by the multi asset portfolio over a period of 10 years. If you had invested Rs 1 lakh on 26th November 2010 you would have got a whopping 5.64lakhs from Nasdaq, 2.89 lakhs from our Mutli asset portfolio ,which stands second in terms of return and 2.37 lakhs and 2.15 lakhs from nifty and gold respectively.

I agree with you that Multi asset portfolio has not outperformed nifty by a wide margin. But there in another aspect which makes multi asset portfolio a clear winner - a lesser drawdown during the times of market crashes or in other words consistency of returns.

3 -year rolling returns.

5 -year rolling returns.

When markets witnessed turmoil during 2008 and 2020 due to GFC and Covid respectively, nifty could not hold the fort. But our multi asset portfolio gave a better returns which is evident form the 3 year and 5 year rolling return graphs.It is quite clear the fall was less for multiasset portfolio

Now let us take a look at the calendar year returns.

Nifty gave -22% in 2011 while multi asset gave -1.5% , nifty gave -3.9% in 2015 while muti asset gave -1% . These figures also shows why we need to have different baskets for our eggs .

Looks like my Mom was right ….

Note: Past is not always indicative of future performance. Invest in the market at your own risk . I hold Gold bees and Nasdaq-100 in my portfolio.