Where the risk
actually sits.
Stocks swing about 18 per cent a year, bonds about 5. So every rupee in stocks carries roughly three times the weight of a rupee in bonds. Split your capital 60/40 and the math splits your risk 95/5.
| Sleeve |
Capital weight |
Risk weight |
| Stocks . vol 18 pct | 60 pct | 95 pct |
| Bonds . vol 5 pct | 40 pct | 5 pct |
A 50/50 split barely helps. Still about 91 pct of the swing is the stocks. To split the risk evenly you flip the whole thing: roughly 22 pct in stocks, 78 in bonds, and the whole portfolio swings about 5.8 pct a year instead of 11. That is the portfolio that is actually balanced. Almost nobody holds it.