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Asset Allocation Models

Category: Investment Frameworks - Portfolio Construction Last Updated: 2026-06-08

Overview​

Asset allocation is the process of dividing investments among different asset classes to balance risk and return according to goals, risk tolerance, and time horizon.

Common Asset Allocation Models​

By Age - 100 Minus Age Rule​

Equity Allocation % = 100 - Your Age

  • Age 30: 70% equity, 30% debt
  • Age 50: 50% equity, 50% debt
  • Age 70: 30% equity, 70% debt

Permanent Portfolio (Harry Browne)​

Equal Weight Across 4 Asset Classes:

  • 25% Stocks - for prosperity
  • 25% Bonds - for deflation
  • 25% Gold - for inflation
  • 25% Cash - for recession

Philosophy: Always have something working in any economic scenario.

Sample Portfolio for Young Professionals​

Age 25-40:

  • 70% Equity
    • 30% Nifty 50
    • 40% Nifty Next 50
    • 20% International (NASDAQ/S&P 500)
    • 10% Mid/Small cap
  • 20% Debt
    • PPF
    • NPS
    • Liquid funds
  • 10% Gold
    • SGB / Gold ETF

Sample Portfolio for Retirees​

Age 60+:

  • 30% Equity (for inflation protection)
  • 60% Debt (for stability and income)
  • 10% Gold (hedge)

3-Bucket Strategy for Retirement​

Bucket 1 - Immediate Needs (2-3 years):

  • 90% Short-term debt funds
  • 10% Savings account
  • Purpose: Current expenses, market downturns

Bucket 2 - Growth (Long-term):

  • 30% Nifty 50
  • 20% NASDAQ
  • 15% Hybrid funds
  • 30% Direct stocks
  • 5% Commodities

Bucket 3 - Stable Long-Term:

  • Government bonds
  • PPF
  • Long-term FDs

4-Fund Simple Portfolio​

Minimal complexity, maximum coverage:

  1. Nifty 50 Index Fund - Large cap India
  2. Midcap Index Fund - Mid cap India
  3. Debt Fund - Short/Medium term
  4. Gold Fund - Gold ETF/Gold fund

Allocation varies by age and goals.

Goal-Based Allocation​

Goal TimelineEquityDebtExample Goal
< 3 years0-20%80-100%Car, Vacation
3-7 years30-50%50-70%House down payment
7-15 years50-70%30-50%Child education
> 15 years70-90%10-30%Retirement

Asset Allocation Types​

Strategic Asset Allocation:

  • Long-term target allocation
  • Set and forget
  • Rebalance annually

Tactical Asset Allocation:

  • Short-term deviations from strategy
  • Based on market conditions
  • Return to strategic allocation

Dynamic Asset Allocation:

  • Allocation changes with market valuation
  • Rules-based adjustments

References​