I’ve been testing a rules-based allocation framework combining:
- Nifty 50 exposure * Gold as a defensive allocation * Trend and realized volatility filters * Monthly rebalancing
The objective was not maximizing raw returns, but improving long-term risk-adjusted performance and reducing drawdowns relative to long-only equity exposure.
Backtest period: Jan 2015 – Mar 2026
Assumptions:
- no leverage * no shorting * transaction costs included
Results vs Nifty 50 buy & hold:
- CAGR: 16.57% vs 9.09% * Max Drawdown: -18.89% vs -38.44% * Sharpe Ratio: 0.78 vs 0.16
The main tradeoff is that the framework tends to lag during sharp V-shaped recoveries because exposure reduction follows volatility expansion.
Interested in discussion around:
- whether gold is an effective long-term defensive allocation for Indian investors * whether regime-based allocation genuinely improves long-term portfolios * alternative defensive assets or diversification methods * balancing drawdown reduction vs upside participation