Equities, Debt or Gold: What should be the right asset allocation strategy in today’s market?


Right now, when the market hits an all-time high, the equity allocation in the existing portfolio will look quite high compared to the expected allocation.

When stock prices go up, many investors flock to buy them. Likewise, when gold prices go up, people rush to buy yellow metal. But, should this be the approach while investing in assets such as stocks, debt and gold? The simple way to make money investing is to buy low and sell high, and this is true for all assets.

This is, however, easier said than done as most investors fail to stick to a proper asset allocation strategy which often has a negative impact on their portfolio. A common mistake most investors make is to jump from one asset class to another, just looking at its recent performance. “Asset allocation strategies should not be driven by short-term market movements. They are best motivated by the risk appetite, investment goals and horizon of the investor, coupled with the long-term behavior and expected outcomes of asset classes, ”said Abhishek Dev, Chief Commercial Officer by TRUST MF.

However, how much should you invest in stocks, gold or debt after factoring in your contributions to the provident fund? It has nothing to do with stock market levels or gold prices, but a review of your allocation strategy may require adjustment depending on market conditions.

So, before you even start investing, prepare an asset allocation. Based on the short, medium and long term goals as well as your risk appetite etc., you need to develop an asset allocation strategy. “Asset allocation should be based on financial goals or objectives and not on market conditions. Right now, when the market hits an all-time high, the equity allocation in the existing portfolio will look quite high compared to the expected allocation. A better way to realign asset allocation will be to make new investments in non-equity instruments if necessary, ”says Harshad Chetanwala, co-founder of MyWealthGrowth.com.

“The asset allocation strategy will vary from person to person. For a normal investor, an equity portfolio might consist of 70-80% funds, 15-20% gold, and 5-10% debt. For conservative investors, the allocation to gold can be increased up to 30% ”, informs Nitin Shahi, executive director of Findoc, Financial Services Group.

For example, short-term interest rates are expected to rise, but the long-term trend is still intact. “In the short term, interest rates may rise, but longer interest rate cycles for global economies may remain stable in downward cycles. Right now, the 30% allocation should be in arbitrage funds, 40% in equity funds, 20% in gold and 10% in debt mutual funds. Amit Jain, Co-Founder and CEO, Ashika Wealth Advisors.

With the stock market at almost unprecedented levels, this might be the time to review and rebalance its asset allocation. In investments that may have grown considerably, some adjustments may be made. “Since indices and small cap funds have grown significantly over the past year, it may be a good strategy to make profits from such investments. The rest of the equity investments can continue to stay invested. If you are planning to invest now, then a phased way of investing can work well, rather than just once, ”adds Chetanwala.

If the value of the asset has decreased and the proportion has changed, modifications are necessary to stick to the composition of the original allocation. “From an equity market perspective, we think it’s impossible to time the market. Only with hindsight will we know if we are reaching historic highs or if we have a significant lead from here. That said, investors should rebalance their portfolios at regular intervals and, in consultation with their financial advisors, decide on the right asset allocation based on their risk appetite, ”says Prateek Pant – Chief Business Officer – White Oak Capital Management

When it comes to debt funds, it might be better to steer clear of funds with long-term securities. “To invest in debt, you can continue to invest in short to medium duration instruments,” Chetanwala informs.

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