Is it okay to invest everything in equities?

  • Is it okay to invest 100 percent of your money in equity? or
  • Is it okay to invest 100 percent of your money in equity at least initially and then reduce the equity allocation later?

Equities for short-term goals could backfire

First things first, and before we even delve into long-term equity allocation, it must be understood that for short-term goals, equity is best avoided. Goal timelines are one of the prime factors to consider before deciding on asset allocation. And any goal that has a short investment horizon (say, just a few years), is not worth taking the equity risk. At least, not on a major part of the corpus.

Is it okay to invest 100 percent of your money in equity?

Theoretically, yes. For those who have a very long investment horizon (say 15+ years) and also have a good appetite to digest the volatility in intermittent years, investing 100 percent in equity is a possibility.

Is 100 percent equity okay during initial years of long-term goals?

If your risk appetite permits, then yes, this can be considered.

As an example, here is what can be done:

  • 0–7 years — 100 percent equity
  • 8–12 years — 80 percent equity
  • 12–15 years — 60 percent equity
  • 16–18 years — 0–30 percent equity

Within 100 percent equity, diversify well

This is important. Not all sections of equity markets perform well at the same time. At times, large-caps will do well, at other times, mid-caps will deliver eye-popping returns. Similarly, different sectors will do well at different times. So even if you start with 100 percent equity allocation, make sure you diversify properly, across large-caps, mid-caps, different sectors, etc.

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Stockrani

Stockrani

Gain Financial Literacy and Freedom.