How much should one invest in Equity?



Let me explain, the 100 is meant to indicate the human lifespan, so this form of investment allocation is based on the fact that as you are younger you can invest more in equity because you have the capability to take risks and also have a longer horizon. As you grow older your propensity to take risks is limited and need for regular income is more, so more of your money needs to be kept in debt investments.


As an example if you a 40 year old person, based on this formula , 100-40 = 60,


Your Portfolio must be constructed as :


60 % in Equity Mutual Funds, Stocks and other forms of Equity &

40% in Bank Deposits, FDs, Bonds & other debt investments.

I know scores of investors who have followed this rule and have been deeply satisfied in their wealth journey. However a few points need to be remembered as an exception as it is in every rule.

  1. While this is true for a basic investor, for person who are High Net worth once the basic portfolio construct to generate a regular return is achieved, the surplus can be deployed largely into longer term investments. For example High Net worth Individuals aged 60 years may even have an equity portfolio of 80%, so long as his 20 % debt provides the cash flow needed for his daily living.

  2. Some people are temperamentally unsuited to Equity. To them this formula may not apply at all. Since keeping any form of investment in Equity would be stressful. Your temperament needs to be aligned to this formula as well.

  3. This formula of 100 year human life is a US one, in the Indian context, this formula may need to be normalized to more appropriate say 80 years. So if you are an Indian of age 60 years.. then 40% of 80 ie 32% of your of portfolio needs to be in Equity,not 40%. This is so because the Indian lifespan is rarely 100 years and the American life span is rarely below 100 years. So we need to make that distinction in portfolio construction.

Is this the best method of identifying one’s allocation between Equity & Debt as two asset classes, I am sure there are various more accurate but complex formulas to it.. but this is simple and as straightforward as it gets.


So tell me your Asset Allocation ? I will tell you your age.

Tell us at info@finsherpa.com


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