Recent analysis from FundsIndia Research shows that portfolios with a higher proportion of debt instruments tend to suffer smaller losses when equity markets swing lower. \n\nDuring the 2020 COVID‑19 crash, funds with 60% debt saw a 15% decline versus a 35% drop for equity‑only portfolios. Even during the 2018 global sell‑off, a debt‑heavy mix reduced volatility by roughly 30%.
\n\nHowever, the same research indicates that the upside potential is muted. Over the long haul, equity‑heavy portfolios outperformed debt‑heavy ones by about 4% annually. \n\nRetail investors should therefore calibrate their equity‑debt mix to their risk appetite and time horizon.
A balanced approach—such as a 60:40 equity‑debt split for moderate risk or a 70:30 for higher risk tolerance—can offer a middle ground. Regular rebalancing and monitoring of macro‑economic signals will help maintain the desired risk‑return profile.