Asset allocation by age and risk profile

Picking individual funds gets endless attention. The decision that actually moves long-term wealth — equity vs debt vs gold — gets surprisingly little. Studies of pension-fund performance attribute roughly 90% of long-run return dispersion to asset allocation, only the remainder to security selection.

The "100 minus age" starting point

A common rule of thumb: (100 − age)% in equity, the rest in debt. So a 30-year-old starts at 70% equity / 30% debt; a 60-year-old at 40% equity / 60% debt.

This is a starting frame, not a law. Adjust based on:

• Income stability: a tenured government employee can carry more equity than a freelancer.
• Existing exposure: a real-estate owner with a paid-up house has implicit debt-asset exposure.
• Time to goal: approaching retirement = shift equity → debt over 3-5 years to lock in gains.
• Sleep test: if a 30% portfolio drawdown would force you to redeem, your equity allocation is too high regardless of age.

Where gold fits

A 5-10% gold allocation behaves as a portfolio hedge — gold tends to rise when equities fall and the rupee weakens. Hold via gold ETFs or sovereign gold bonds (the latter pays 2.5% interest annually and is capital-gains-tax-free if held to maturity).

Sub-allocation within equity

Within the equity bucket, a typical core-and-satellite frame:

• Core (60-70%): diversified large-cap or Flexi Cap.
• Satellite (20-30%): mid- and small-cap for upside.
• Tactical (0-10%): thematic or international funds.

Why this matters more than fund selection

Within a category, the dispersion between the best and the worst fund over 10 years is often 4-6% CAGR. The dispersion between 80% equity and 40% equity portfolios over the same window is typically 4-6% CAGR too — but with very different drawdown experiences. Choose your asset allocation first.