Get the Tata Capital App to apply for Loans & manage your account. Download Now

Blogs

SUPPORT

Loans For You
Loans for Business
Investment
Insurance
Apply

Quick Links for loans

Quick Links for Insurance

Investment

Offers Quick Pay
Back

New Car Loan

Know More
Back

Equipment Finance

Avail Digital Equipment Loans
up to Rs. 1 Crore

  • Attractive ROIs
  • Customizable Loan tenure
Know More
Back

Equipment Leasing

Avail Leasing solutions
for all asset classes

  • Up to 100% financing
  • No additional collateral required
Know More
Back

New Commercial Vehicle Financing

  • First time user
  • Retail and strategic Clients
Know More
Back

Used Commercial Vehicle finance

  • Repurchase
  • Refinance
  • Top up
  • Balance Transfer
Know More
Menu  
Apply Now

Tata Capital > Blog > Wealth Services > Pure Equity vs Asset Allocation— Which is Better?

Wealth Services

Pure Equity vs Asset Allocation— Which is Better?

Pure Equity vs Asset Allocation— Which is Better?

What sounds better when investing your money— going all in for potentially higher rewards but with higher risk or playing it safer for potentially lower but more stable returns?

Choosing between the risks and rewards of a pure equity portfolio vs a more diversified portfolio can be difficult. Your investment goals and risk appetite hold significant importance in making that decision.

This article explores the differences between pure equity and asset allocation to help you choose the best option for your investment journey.

What is a Pure Equity Portfolio?

A pure equity portfolio invests primarily in equities and earns dividends and capital gains.

Pure equity offers compounding returns and higher growth potential in the long run. Pure equity portfolios increase in value during economic growth and bull markets, which helps you secure the purchasing power of your investments and stay ahead of inflation.

Additionally, pure equity offers higher liquidity as compared to other investment options like certain fixed-income securities.

What is Asset Allocation?

Asset allocation means diversifying your portfolio by investing in different investment vehicles like debt, real estate, equity, gold, etc. It combines lower-risk, lower-return assets with higher risk, higher-return assets to mitigate risk while optimising returns.

Asset allocation provides protection against downsides such as a sudden market crash. It automatically rebalances assets to maintain the equity-debt ratio during market changes.

The lower volatility and risk help reduce stress and strengthen your commitment to long-term investment goals.

Difference Between Pure Equity and Asset Allocation

The following table lays out the difference between pure equity and asset allocation:

FeaturePure equityAsset allocation
Investment strategyInvests exclusively in stocks or equities to generate higher returns in the long-termInvests in different asset classes, such as bonds, stocks, real estate, commodities, etc. in order to balance risk and returns
Risk levelVery high riskModerate risk
Return potentialRelatively higher return potential over the long period, especially during bull marketsRelatively more stable return potential across market cycles
Investor profileVery high-risk tolerancehigh-risk tolerance

Pure equity vs asset allocation: which should you choose?

Pure equity portfolios can generate relatively higher returns over time than diversified portfolios. However, asset allocation safeguards your investments against downsides and offers stability.

Consider the following factors when choosing between pure equity vs asset allocation:

1. Risk tolerance: High-risk investors can go for pure equity for its high return potential for longer investment horizon. However, the potential fall in portfolio value due to market changes can deter investors with a relatively lower risk tolerance. A more balanced and diverse portfolio can be more suitable for them.

2. Investment horizon: A pure equity portfolio has a higher return potential over time and is suited for long-term investment goals. For short-term goals, a higher debt allocation is a better option.

3. Age: Younger investors with a high-risk tolerance and longer investment horizons can opt for pure equity. Older investors who may be close to retirement should become more conservative with their investments and go with asset allocation for a more balanced portfolio.

4. Market conditions: Asset allocation can provide downside protection during uncertain market conditions, whereas a pure equity portfolio is vulnerable to downsides.

Wrapping up

While pure equity can offer higher returns, it comes with higher risk and volatility. On the other hand, asset allocation mitigates risk and offers stability, which can help you stay committed to your investment goals in the long run.

Begin your investment journey with Tata Capital Wealth and avail a range of financial services and expert guidance to meet your financial goals. To learn more, visit the Tata Capital Wealth website today!

Build Your Wealth with Expert Guidance from Tata Capital!

Apply now
Popular Searches
aif full form pms vs mutual fund bnpl meaning aif taxation debt investment options debt syndication perpetual bond unlisted equity shares meaning gold etf vs gold bond plot plus construction loan
Disclaimer

Most Viewed Blogs

Trending Blogs

Calculator

Personal Loan EMI Calculator

Personal Loan EMI Calculator
Home Loan EMI Calculator

Home Loan EMI Calculator
Business Loan EMI Calculator

Business Loan EMI Calculator
More Tools
Our Subsidiaries
Our Private Equity Funds

Useful Links and Resources

Most Important Terms & Conditions - Home Loans

Download in your preferred language

Download

Policies, Codes & Other Documents

Most Important Terms & Conditions - Home Loans

Download in your preferred language

Download

Tata Capital Solutions & Services

Uh oh, something went wrong

Please try again later.