New Delhi, Aug. 25 -- Risk-averse investors often reject the idea of investing in equity, associating it with higher risk, while viewing debt as the more stable investment option. But the assumption that equity is inherently risky and debt is inherently stable is a complete myth.

A recent study by WhiteOak Capital Mutual Fund found quite the opposite. After looking at several combinations of equity, debt and gold, the study found that over the long term, adding a small allocation to equity could actually reduce the historical volatility of a pure debt portfolio, and at the same time, improve the returns significantly.

Titled Chemistry of Investing, the study analysed average one-year rolling returns and volatility using daily data going...