What Is the Optimum Portfolio to Maximize Returns and Minimize Risk?
Equity? Bonds? Real estate? Crypto?
There is no universally “perfect” portfolio. No one has a crystal ball!
Markets evolve, economic cycles shift and every asset class takes its turn leading and lagging.
Yet, amid all this uncertainty, two principles survive every cycle and every generation of investors:
Diversification + Conviction
Diversification spreads risk across assets that behave differently.
Conviction ensures you stay invested long enough for the strategy to work.
When both come together, portfolios become stronger, more resilient and capable of compounding through good times and bad.
The Numerical Lens: What Diversification Actually Does
To move beyond theory, consider 3 asset classes
- Equity: Nifty 50 (10-year return: 14.16%)
- Bonds: 10-year G-sec (expected return: 7.1%)
- Real Estate: Fractional Real Estate Tokens / REITs (yield + appreciation: 8 -10%)
A realistic baseline for how these three core asset classes behave over long periods.
Portfolio Outcomes – With & Without Real Estate
| Portfolio | Equity | Bonds | Real Estate | Expected Return | Risk (Std Dev) |
| P1 | 70% | 30% | 0% | 11.42% | 11.55% |
| P2 | 65% | 30% | 5% | 11.08% | 11.34% |
| P3 | 60% | 30% | 10% | 11.60% | 10.70% |
| P4 | 60% | 25% | 15% | 10.93% | 10.07% |
| P5 | 50% | 30% | 20% | 10.39% | 10.80% |
(1. Equity (Nifty 50)- Sources: NSE historical data, Money-control, Trading-Economics2. Bonds (10-Year G-Sec) – Sources: RBI, India Bond Markets3. Real Estate (REITs / Fractional CRE) – Sources: Embassy REIT, Mindspace REIT, NexGen CRE reports)
What’s Actually Happening Here?
When you look at these numbers, a clear pattern emerges.
1. A small addition of real estate smoothens volatility immediately
Even a 10% allocation meaningfully lowers risk. Why?
Real estate does not move in lockstep with equity or bonds. Its income-driven nature brings stability that equities alone cannot match.
2. Increasing real estate further stabilises returns
At 15-20% real estate, portfolios become even more stable, though expected returns soften a bit. This is the classic diversification trade-off: lower risk often comes with slightly lower return potential.
3. Equity remains the primary driver of long-term growth
No surprise here. Equities, over long horizons, deliver the highest returns – but also the highest volatility. Bonds and real estate help balance that equation.
4. The “sweet spot” appears around 10-15% Real estate
At this level, you capture the diversification benefits without diluting growth too much.
It is the point where the risk-reward ratio is the most balanced.
This reinforces a timeless investment truth:
Diversification doesn’t eliminate risk – it makes the journey smoother.
You still capture returns, but with fewer shocks along the way.
There Is No One-Size-Fits-All Portfolio,
It depends on:
- Investment horizon
- Risk appetite
- Income stability
- Financial goals
For example:
An individual investing for retirement 35 years away can afford a high-equity portfolio like 70% equity / 20% debt / 10% real estate, because short-term volatility doesn’t bother him.
But someone who wants to retire in 2 years cannot risk a big market fall. She needs stability, so something like 30% equity / 50% debt / 20% real estate is more suitable.
Similarly, consider a young professional with an unstable income – say a freelancer whose monthly earnings fluctuate. A more balanced mix like 50% equity / 35% debt / 15% real estate helps her stay invested without panic-selling.
On the other hand, a high-earning individual with a steady salary and no dependents can afford to take more aggressive bets. For him, a portfolio like 80% equity / 10% debt / 10% real estate, may make sense to maximise long-term upside.
The Bottom Line: Build the Portfolio That Builds You Back
There is no magic formula, no universally perfect mix of equity, bonds and real estate. The “optimum portfolio” is simply the one that you can stick with, through volatility, uncertainty and market noise.
But the data does point to one consistent insight: Real estate strengthens portfolios
It may not deliver the highest returns like equity, but it brings something just as valuable:
stability, steady income and low correlation with market swings.
That’s why even a 10 -15% allocation made every portfolio in our model smoother, more predictable and more resilient – without meaningfully sacrificing returns.
In a world where equity cycles turn fast and debt returns fluctuate,
Real estate stands out as the quiet, reliable anchor – balancing volatility, adding yield and protecting long-term compounding.
And in today’s landscape, Fractional Real Estate Ownership takes this even further.
It offers all the benefits of real estate – stability, yield, diversification – without the high ticket sizes, lock-ins or liquidity constraints of traditional property.
