Portfolio lab
Which simple mix of Indian assets has done best?
Nine portfolios of Nifty 500, the 5-year G-sec, domestic gold and cash, rebalanced by fixed rules from October 2002, after costs and Indian tax. On an after-tax basis the leader is 100% equity (Nifty 500), at 16.8% a year.
For: investors choosing an allocation, and advisers who want the tax drag of tactical rules measured.
Historical research on index portfolios. Not investment advice. Pre-tax unless the column says aftertax (Indian capital-gains rules by date; simplifications in compute/aftertax.py). One 24-year sample in which gold rose strongly; domestic assets only (global index levels cannot be republished). Rules were fixed in the pre-registered specification before any result was seen.
The league table
| Portfolio | CAGR | After tax | Volatility | Sharpe | Worst fall | Worst year | Worst 5 years (a year) | 5-year windows beating 60/40 | Turnover a year |
|---|---|---|---|---|---|---|---|---|---|
| 100% equity (Nifty 500) | 17.2% | 16.8% | 20.5% | 0.57 | -64% | -57% | -1.9% | 71% | 0.04 |
| 60/20/20 equity/G-sec/gold | 16.3% | 15.5% | 12.3% | 0.78 | -36% | -25% | 3.0% | 76% | 0.16 |
| Dual momentum | 17.4% | 14.7% | 18.3% | 0.63 | -45% | -32% | 3.5% | 42% | 3.76 |
| 60/40 equity/G-sec | 14.6% | 13.9% | 12.1% | 0.67 | -36% | -27% | 3.0% | 0% | 0.15 |
| Equal thirds | 14.6% | 13.6% | 8.7% | 0.88 | -19% | -4% | 5.6% | 50% | 0.16 |
| Permanent (25% each) | 12.6% | 11.7% | 6.6% | 0.88 | -15% | -1% | 5.9% | 24% | 0.15 |
| 60/40 with trend filter | 11.8% | 10.3% | 9.8% | 0.55 | -21% | -9% | 4.5% | 23% | 2.39 |
| Trend-filtered three assets | 11.6% | 9.3% | 7.5% | 0.67 | -18% | -3% | 5.2% | 19% | 3.09 |
| Risk parity | 10.3% | 8.8% | 4.2% | 0.87 | -7% | 1% | 7.5% | 16% | 0.40 |
Growth of 1
Static mixes
Weekly, pre-tax, after costs. Log scale.
Loading chart…
Rule-based and tactical mixes
Weekly, pre-tax. Tactical rules lost 1.6 to 2.8 points a year to tax; see the after-tax column above.
Loading chart…