Investors are classified broadly into categories based on the risk and return profiles. Indicative portfolios for these profiles may be constructed as follows:

Asset Conservative Moderately Conservative Moderate Moderately Aggressive Aggressive
Short term bills 20% 15% 10% 7.5% 5%
Long term debt 60% 50% 40% 25% 10%
Gold 10% 10% 10% 7.5% 5%
Commodities 0% 0% 0% 5% 10%
Large cap equity 10% 20% 30% 30% 30%
Mid cap equity 0% 5% 10% 15% 20%
Real Estate 0% 0% 0% 10% 20%
Total 100% 100% 100% 100% 100%


These are broad guidelines for long term investors. However, if your investment horizon is less than three years, you must choose income assets.

Asset classes like equity and real estate provide long term growth but come with short term volatility. Asset classes like deposits, bonds and other fixed income securities provide income. The allocation between growth and income depends on the investor needs, and therefore, portfolio return is driven by the financial goals of the investor.

Assets Primary objective
Short term bills Income
Long term bonds Income
Gold Growth
Commodities Growth
Large cap equity Growth
Mid cap equity Growth
Real Estate Growth

We will briefly discuss what qualifies under debt, gold, equity and real estate.

Debt – Most of the people think that investing into an FD is the only risk free investment. Well, all debt oriented assets are driven by same factors i.e. inflation and interest rate. Therefore PPF, NSC, Post Office schemes and Fixed deposit fall under the same bracket. One other product that people are fond of is Insurance linked investments especially LIC. Please note that LIC generates 6-6.25% p.a. after tax return. Therefore, even investing in LIC would qualify as debt investment.

Gold – As an investment, one can purchase it as coins, bars, jewellery, or through mutual funds known as gold ETFs (Exchange Traded Funds). However, the best way to invest in gold is using gold exchange traded funds. This route of investment in gold decreases the cost and taxation, and gives safety against theft. The liquidity and divisibility is good.

Real Estate – Never invest in real estate with less than 8 years of time horizon. There are no short term gains in real estate. Do not get lured by various builders coming up with guaranteed schemes. Study the project and assess past record of the builder. Last but not the least make sure the project is located at an excellent location.

Equity – Time horizon for equity investment is more than 8 years. Performing various analysis and researching good stocks is a skilful task. If you do not have the right skill, you can hire a financial advisor who can help you make the right decision.