Asset Allocation: How Much in Equity, Debt and Gold
How much of your money is in equity decides more of your result than which fund you pick, and it decides how bad the bad years feel. You set it once, from two questions.
Figures checked · How we calculate
−34%the worst fall of 60% equity and 40% debt since 2008, against −60% for all equity
₹10 lakh invested on 1 January 2008, the worst possible start, in the Nifty 50 alone was worth ₹47.6 lakh by 16 October 2026. The same ₹10 lakh split 60% Nifty and 40% debt, put back to 60/40 every January, was worth ₹48.7 lakh. Nearly the same result. The all-equity investor watched ₹10 lakh fall to about ₹4 lakh in 2008. The 60/40 investor watched it fall to about ₹6.6 lakh, and was back above ₹10 lakh a year sooner.
Your mix decides most of what happens to your money
Three numbers describe a portfolio well enough to plan with: how much is in equity (shares and equity funds), how much in debt (deposits, debt funds, EPF, PPF), and how much in gold. Choosing between two good equity funds changes your result by a little. Choosing between 40% and 80% equity changes it by a lot.
Here is what each mix did from January 2009, when gold data begins, to October 2026, starting with ₹10 lakh and resetting the mix every January:
| Equity / debt / gold | ₹10 lakh became | A year | Worst fall | Worst calendar year |
|---|---|---|---|---|
| 100 / 0 / 0 | ₹94.8 lakh | 13.5% | −38.3% (2020) | −23.7% (2011) |
| 80 / 20 / 0 | ₹80.4 lakh | 12.4% | −30.5% (2020) | −17.5% (2011) |
| 60 / 30 / 10 | ₹75.3 lakh | 12.0% | −22.7% (2020) | −9.1% (2011) |
| 40 / 50 / 10 | ₹61.2 lakh | 10.7% | −14.9% (2020) | −3.0% (2011) |
January 2009 was close to the bottom of the 2008 crash, which flatters equity in this table. From January 2008, a year earlier, all equity returned 8.7% a year and 60/40 returned 8.8%.
Two questions set your mix
1. When will you need the money? This sets the most equity you can hold.
| Needed in | Equity, at most | Why |
|---|---|---|
| Under 3 years | None | Two of the Nifty's nine big falls since 2008 took about three years to recover. |
| 3 to 5 years | About 30% | Enough time for most falls, not for the worst. |
| 5 to 10 years | About 60% | Every fall since 2008 has recovered within this window. |
| Over 10 years | Up to 80% or more | Time to recover from a 2008, if you hold on. |
2. What fall can you sit through without selling? This sets the equity you should actually hold, which is often less than the first answer allows.
The 2008 crash took 60% off the Nifty. A simple way to price your own fall: multiply your equity share by 60%. At 60% equity, a 2008 would take about 36% off your portfolio; the yearly-rebalanced 60/40 above fell 34.4%.
- 40% equity₹4.8 L₹8 lakh in equity falls by ₹4.8 lakh. The portfolio is down 24%.
- 60% equity₹7.2 L₹12 lakh in equity falls by ₹7.2 lakh. The portfolio is down 36%.
- 80% equity₹9.6 L₹16 lakh in equity falls by ₹9.6 lakh. The portfolio is down 48%.
- 100% equity₹12.0 L₹20 lakh becomes ₹8 lakh. Most people who sell at the bottom were here.
A 60% fall in equity, with debt and gold unchanged. 2008's actual fall in the Nifty was 59.9% from peak to low. The real loss is a little smaller if debt keeps earning through the fall, and larger if you sell.
If the ₹ figure on your row would make you sell, choose the row above it. A mix you abandon in a crash is worse than a cautious mix you keep.
Count your EPF and PPF as debt
Most salaried investors already hold a large amount of debt without thinking of it that way. EPF, PPF, fixed deposits and the savings account are all debt.
Someone with ₹6 lakh in equity funds and ₹4 lakh in EPF is 60/40, not 100% equity. If they think of the funds as "the portfolio" and buy only debt funds to balance it, they end up with far more debt than they meant to. Add everything up first. The EPF, PPF and NPS guide covers what each account pays.
Gold: up to 10%, for the years when shares fall
Gold has no earnings and pays no interest. It earns its place by sometimes rising when shares fall. In 2011 the Nifty fell 24.6% and gold rose 29.9%, which is why the 60/30/10 mix above had a worst year of −9.1% against −11.4% for 60/40 without gold.
It does not always work. In the 2020 crash gold did not help: 60/30/10 fell as far as 60/40. And gold had an exceptional run in 2024 and 2025 that flatters it in every table ending in 2026. Ten percent is enough to help in a 2011 and small enough not to hurt in the long stretches when gold goes nowhere: anyone who bought at the November 2012 high was still below their purchase price in 2019. How to buy it cheaply is in gold ETF vs digital gold vs jewellery.
Move money out of equity before you need it
A goal with a date, such as a child's college fees in 2032, should not be in equity when the date arrives. Move it in steps: start about five years before, and have it fully out by three years before. Doing it on a schedule means a crash in the last few years cannot touch money that is already out.
Retirement is the exception. You will need the money over 25 years or more, not on one date, so part of it can stay in equity well after you stop working.
Questions people actually ask
Is "100 minus your age in equity" a good rule? It gives a 30-year-old 70% equity and a 60-year-old 40%, which is a sensible starting point. But it ignores the two things that matter more than age: when you need the money and how you behave in a fall. A 30-year-old saving for a house in two years should hold no equity for that money.
Should I hold midcap and smallcap funds too? They are still equity, so they come out of your equity share, not on top of it. They fall further than the Nifty in bad years. Keep most of your equity in a broad index fund and treat the rest as a choice, not a requirement.
Does a fixed deposit count as debt? Yes, and so does a debt fund, EPF, PPF and any cash you are holding for more than a few months. An emergency fund is separate: it is not part of the investment mix, because it should never be rebalanced into shares.
Where do these figures come from? Daily closes of the Nifty 50 from 2008 and of Nippon India Gold BeES, a gold ETF, from 2009, to 16 October 2026. The Nifty figures add about 1.25% a year for dividends, from NSE's published price and total returns. Debt is assumed to earn a steady 7% a year, which is roughly what high-quality debt funds and deposits paid over the period but smooths out their small ups and downs.