“Your portfolio is very good, but these are relative return strategies,” said Priya, a wealth manager, to Tarun, a senior chartered accountant. “You need an absolute return strategy too, which we offer. We are absolute return specialists.”

Absolute return specialists? What does that even mean?

The truth is, this is marketing jargon designed to confuse. Tarun’s portfolio wasn’t built in isolation or against a random benchmark. It was built as a reflection of his personal goals. It was crafted to help him live the life he has imagined with his money. And that, in itself, is an absolute return strategy.

Let’s dive deeper into why this concept of absolute vs. relative returns often misleads investors. And why the only absolute return strategy you need is one tailored to your unique life goals.

What Are Relative and Absolute Returns?

At a surface level, the terms seem straightforward:

• Relative Returns: Returns measured against a benchmark, like a market index (e.g., Sensex, Nifty).
• Absolute Returns: Returns that are not compared to any benchmark but measured in isolation (e.g., a fund promising to deliver 8% regardless of market conditions). 

Financial professionals often position absolute return strategies as the “better” option. They frame them as offering certainty in uncertain markets. But here’s the problem: Investing is not about beating benchmarks or guaranteeing returns. It’s about meeting your personal goals.

The Flaws in Absolute Return Strategies

Absolute return strategies are often marketed as the solution to all investor problems. They promise stable returns regardless of market conditions. But scratch the surface, and the cracks begin to show.

1. They Ignore Personal Context

Absolute return strategies are designed to generate a fixed or consistent return. But they don’t take your individual needs into account. What if your goals require an 11% return? What if you only need 5%? A generic “absolute return” product cannot adapt to your unique financial life.

2. They Often Underperform

Many absolute return funds are structured using hedging techniques, complex derivatives, or a mix of asset classes. While these might reduce volatility, they also limit upside potential. In striving for consistency, they often fail to deliver returns that match broader market growth.

3. They Come with High Costs

Absolute return strategies are usually managed actively and involve complex instruments. This makes them expensive. The fees eat into your returns, reducing the overall effectiveness of the strategy.

4. They Sell False Certainty

No strategy can eliminate risk entirely. Markets are inherently unpredictable. Absolute return strategies often sell the illusion of certainty, but no investment can promise returns without risks or trade-offs.

5. They Distract from What Matters

Focusing on absolute returns shifts attention away from the bigger picture: your life goals. Investors often get caught up chasing these “all-weather” strategies, forgetting that investing is not about chasing numbers—it’s about fulfilling dreams.

Your Personal Index: The Real Absolute Return Strategy

Investing should not be a numbers game. It should be a life game.

Your portfolio doesn’t need to beat the Nifty or deliver a fixed 10% return every year. What it needs to do is help you achieve your goals. That’s why the most effective investment strategy isn’t “relative” or “absolute” in technical terms—it’s personal.

We call this your personal index.

What Is a Personal Index?

Your personal index is a financial roadmap based on:

• Your goals (retirement, education, travel, etc.).
• Your required cash flow and lifestyle needs.
• Your risk tolerance and time horizon.

It answers one critical question: What returns do I need to live the life I imagine?

This is the only return that matters. And it’s absolute in the truest sense—because it’s absolutely tailored to you.

Why Your Personal Index Is Superior

1. It’s Anchored in Your Life Goals

Your personal index ensures your investments align with your dreams. It’s not about beating the Sensex. It’s about funding your child’s education, securing your retirement, or traveling the world.

2. It Adapts to You

Unlike rigid absolute return strategies, your personal index evolves with your life. If your goals or circumstances change, so does your investment strategy.

3. It Balances Risk and Reward

Your personal index is designed around your comfort with risk. If you’re risk-averse, it factors that in. If you’re comfortable with market volatility, it accounts for that too.

4. It’s Transparent

There’s no guesswork or unnecessary complexity. You understand why you’re investing the way you are and how it helps achieve your goals.

5. It Avoids Unnecessary Costs

Since your strategy is goal-driven, it avoids unnecessary products, fees, or complexity. This keeps more of your returns in your pocket.

Busting the Myth: Why Absolute Returns Aren’t Necessary

The investment world loves buzzwords. Absolute returns sound appealing because they promise certainty. But here’s the truth: Investing is not about eliminating uncertainty—it’s about managing it intelligently.

Absolute return strategies are unnecessary because:

• They’re not tailored to individual goals.
• They often sacrifice growth for the illusion of stability.
• They come with hidden costs and complexities.

Your personal index does what absolute return strategies claim to do—without the downsides. It gives you a clear, tailored path to achieving your financial dreams.

The Only Absolute Strategy That Matters

There’s only one absolute strategy that works: the one that mirrors your life. Everything else—relative returns, absolute return products, benchmarks—is noise.

Your money should work for you. It should help you live the life you’ve imagined, not tie you down with arbitrary targets or unnecessary complexities.

So, the next time someone pitches you an “absolute return strategy,” ask yourself:

• Does this align with my goals?
• Does this help me achieve my personal index?
• Or is this just another marketing gimmick?

The answer will guide you to what truly matters—living your life with confidence, clarity, and purpose.

Investing is personal. It’s not about beating the market or chasing fixed returns. It’s about achieving your goals and living the life you’ve imagined.

Absolute returns sound appealing. But they’re just a distraction. The only absolute strategy you need is one that’s built around your personal index—your unique goals, dreams, and needs.

Remember: Your portfolio doesn’t need to impress anyone else. It only needs to work for you.