Let us assume for a minute that you have only 2 asset classes – how much should be in equity and how much should be in debt.

THAT IS THE MILLION DOLLAR question, that we need to answer while wondering what is asset allocation. So let us look at that.

ULTIMATELY immaterial of what questionnaire that you use, what risk profiler you use, clients stick to an asset allocation that THEY are comfortable with. I know once civil servant (amazingly humble even while in office) who decided that all his money should be in bank fixed deposits. What about his wife? she was a banker – who knew NOTHING about investments. She actually said “let my husband handle my money” – both of them had a nice big corpus in bank fixed deposits.

Tried telling him about tax deferral, inflation risk, ….but he would not budge. Frankly it did not matter – between them they had a SIX figure (each one almost had that much). The children were abroad, he had retired she was about to.

Comfortably he could have been about 40% in equity. He was currently about 1% in equity. Nothing happened.

One person about 54 years of age…has about 18% of his investments in equity. This will really do nothing for his accumulation, but he has a combination of large cap, mid cap, small cap, balanced fund, child plan, pension plan, micro cap, …when he asked me I said “I have no ability to understand what you have done”. He also has about 5 debt fund, some FMPs, and of course the classic endowment. Overall over the past 15 years he has been consistently under-performing the INDEX and getting a negative return on the whole portfolio.

Look frankly when you are young and are investing small amounts of money you HAVE TO BE IN EQUITIES. As your corpus keeps getting bigger you will keep putting more into equity. Sometime when you are say 50 years of age you will have about 70% in equity. Now on going forward put MORE in debt, but as your equity keeps growing…the equity portion will remain reasonably high.

How much to invest in large cap, mid cap, multi cap is a NEVER ending answer.

So if you do not understand all this please be about 70+ percentage in LARGE CAP EQUITY. Then what you do with the balance 30% does not matter too much. If you are too worried about what to do put the money in a multi cap balanced fund. So just one fund – a balanced fund which has about 65% in equities….that is all.

  1. dear subra,
    i personally feel you should concentrate writing on institutions than individuals
    i need you to concentrate on “SEBI:,INDICES,”P” notes,govt,BSE SENSEX,NSE SENSEX,
    LOTS of rules and regulations have changes happened in last 20 years
    dr m surendranehru
    08332

  2. Enjoyed ‘Just Do It!’ approach here.

    In any given situation in life, when you start with no prior experience, you begin (by default) in a state of being ‘lost’.

    In this situation, it is of no practical use if someone tries to explain to you what the overall terrain looks like and what are the possibilities to enjoy it and what are the pit-falls. Although this could become useful on your way later, the most important thing to figure out on a map is ‘Here you are’ indicator.

    Once that is figured out, you don’t need to bother about the whole maize of roads because there are only 2 to 4 roads starting from where you are! 🙂

  3. Hello Subra Sir,
    So as per you we should put all the investment in one fund? In case that fund doesnt work well arent we at risk? Rather then diversifying with diff MF’s

  4. Just a note of caution, because I have often seen many contributors here do this. Sharing your contact details – especially phone numbers on such forums is just inviting a lot of trouble.
    The internet offers many bounties, but there exist an equal amount of risks – Be smart in the new era.

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