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Asset allocation

How should you invest your money? How much should be equities (such as stocks) and how much debt instruments (such as bonds). Explore in this article.
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Do you have your surplus funds ready to invest?

How should I invest my money?

With your money, you will build an investment portfolio. How you distribute your portfolio among different asset categories, such as stocks, bonds and cash is called asset allocation.

Asset allocation provides a balance between risk and reward to an investor. Factors that influence the choice of a specific investment product include:

  • an investor’s risk profile (i.e., aggressive, moderately aggressive, conservative)
  • investment horizon
  • age profile
  • financial goals

Are there any general guidelines around age and asset allocation?

There are no golden rules when it comes to investing.

Young people can afford to take risks since they have more time to recover from losses while investors nearing retirement have less time to recover from losses. Thus, investing strategies may differ between demographics.

Remember that equity schemes are suitable for achieving a long-term financial goals as they generate high returns but they are considered risky. Equity investments (such as stocks, managed funds, and ETFs) are influenced by changes in the stock markets.

Debt instruments, albeit with reasonable returns, add stability to the portfolio ensuring buffer against price changes in the stock market. Some of the common debt instruments include debt security, government bonds, company bonds, fixed deposits. These are less prone to market fluctuations than equity investments.

Here is a basic rule that you can apply when you invest for the long term (that is more than 10 years):


Ideally, investors should hold stock equal to 110 minus their age. Say, for example, a 55-year-old person would have 45% of their investments in the equity market and 55% in debt instruments like bonds and government instruments.

There can be slight variation in this. If you are a conservative investor, subtract your age from 100 and if you are an aggressive investor, subtract your age from 120.

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Stock Market Investing for Beginners

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