A reader says, ” I have a question on my portfolio, which I constructed based on various social media’s “finance DIY” content. Recently, I learned that (from various YouTube channel interviews) in India, multiple famous people are investing less than 60% of their money into equity and the rest in Debt, real estate, Gold, etc. After watching all these videos, I wonder whether I am holding the right asset allocation”.
“I have two goals and have following SIP’s monthly base
1. Retirement: Parag Parikh tax saver fund(D-G) – 25000
2. Son’s education:
- Axis Growth Opportunities Fund(D-G) – 6000
- Nippon Midcap 150 Index Fund (D-G) – 4000
- Parag Parikh Conservative Fund(D-G) – 4000
- PPF – 1000″.
“I plan to split 10K from my retirement portfolio SIP and want to invest in gold ETF or conservative hybrid fund(SBI MF my choice) to decrease equity exposure. Could you please review it and help me? Is this a good decision, or am I fearing unnecessarily?”
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Personal finance is personal. So, there is no point in comparing our choices with others, particularly high-net-worth individuals who can afford to disregard common asset allocation rules.
The common man needs a good chunk of equity in his portfolio to combat inflation over the long term. However, too much equity is risky for the portfolio and can affect our emotions.
An initial equity exposure of 50% to 70% is enough for long-term goals over ten years away. DIY personal finance is absolutely fine, but it should be done methodically without getting swayed by the noise generated by content creators (including this site).
From your list of investments, I see that the equity allocation for your son’s education portfolio is close to 70%. This is fine if the goal is over a decade away. Gradually, you should aim for a step-wise reduction well before the goal deadline. The freefincal robo advisory tool automates this key decision for the user.
Your asset allocation for retirement is unclear. You probably have other investments for this goal. If the equity allocation is too close to 60-70%, then it is fine, but again, you should consider a step-wise reduction.
At this stage of building wealth, you should focus on aggressively increasing your investments each year (within the target asset allocation). If your asset allocation deviates by 5%, rebalance the portfolio without worrying about market conditions, tax or exit loads. See: What are the benefits of portfolio rebalancing?
Review your portfolio only once a year. The value of your corpus for your goals is more important than the returns of your investments. In between reviews, stay away from social media noise. We wish you all the best.
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Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
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