Equity % = 110 - age. 20s: 80-90% equity. 40s: 60-70%. 60s+: 20-30%. Glide path + annual rebalancing. Bucket strategy for retirement. Discipline beats market timing.
LIFE-STAGE ALLOCATION = adjust equity-debt mix by AGE + goals. RULE OF THUMB: equity % = 100 - age (or 110-age for aggressive). STAGES: (1) 20s: 80-90% equity. (2) 30s: 70-80%. (3) 40s: 60-70%. (4) 50s: 40-50%. (5) 60s+: 20-30%. RATIONALE: younger = longer horizon = more risk capacity. Older = capital preservation. GLIDE PATH: gradually reduce equity as you age. EXAMPLE: age 30 → 110-30 = 80% equity, 20% debt.
EARLY CAREER (20s-30s): (1) 80-90% EQUITY (index funds + diversified + some mid/small cap). (2) 10-20% debt (EPF counts). (3) MAXIMIZE equity SIP — long horizon absorbs volatility. (4) RISK CAPACITY high (decades to recover). (5) AVOID over-conservative (FD-heavy) — inflation erodes. EXAMPLE: ₹30K monthly → ₹24K equity SIP + ₹6K debt/EPF. STRATEGIC: this is the wealth-building phase. Equity-heavy + aggressive SIP + compounding = largest corpus impact. Don't waste 20s on low returns.
MID CAREER (40s-50s): (1) 40s: 60-70% equity (peak earning, still growth). (2) 50s: 40-50% equity (de-risk approaching retirement). (3) INCREASE debt allocation (bonds, PPF, debt funds). (4) BUILD retirement corpus aggressively. (5) CHILDREN's education + marriage goals. (6) HEALTH insurance critical. EXAMPLE age 45: 65% equity + 35% debt. STRATEGIC: peak income years — maximize savings rate. Begin glide path to reduce sequence-of-returns risk near retirement.
RETIREMENT (60s+): (1) 20-30% EQUITY (longevity + inflation protection). (2) 70-80% debt + income instruments. (3) SCSS (8.2%), POMIS (7.4%), debt funds, annuity. (4) BUCKET STRATEGY: 3 years cash + 7 years debt + rest equity. (5) 3-3.5% withdrawal rate. (6) HEALTH corpus separate. EXAMPLE: ₹5cr corpus → ₹1.5cr equity + ₹3.5cr debt/income. STRATEGIC: capital preservation + steady income priority. BUT keep SOME equity (25%) — retirement can last 25-30 years, inflation is the enemy.
REBALANCING STRATEGY: (1) ANNUAL rebalance to target allocation. (2) When equity rises (bull market): book profits, shift to debt. (3) When equity falls: buy more (rebalance into equity). (4) GLIDE PATH: reduce equity 1-2% per year approaching retirement. (5) GOAL-BASED buckets: short-term (debt), long-term (equity). (6) TAX-EFFICIENT rebalancing (use new contributions vs selling). (7) AVOID emotional decisions (don't panic-sell in crashes). (8) REVIEW after major life events (marriage, kids, job change). STRATEGIC: discipline + rebalancing > market timing. Automate where possible. Life-stage allocation = personalized risk management.