Is it fine to keep 100% equity allocation for my retirement which is 30 years away?
- Aayush
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Principally yes but market is a very weird place. It presents you with a rollercoaster-ride. When the going is good you feel optimistic about it but when it isn't, disappointment surrounds you. So to prepare for all the shocks and surprises, some fixed income allocation is important. Even in a long-term portfolio a 10-20 per cent of fixed income exposure helps in many ways. For one, this makes you follow a plan and you get a rebalancing opportunity. This means if you have a 80 per cent allocation in equity with the remaining in fixed income and the equity market tanks, then your 80 per cent will reduce to a lower percentage, say, 60 per cent. This will give you an opportunity to move your money from fixed income to equity at cheaper rates. Developing an asset allocation with shock absorbers and sticking to it is the key.
However, if you are confident enough and willing to stay invested for the complete 30 years and you don't easily get perturbed by the market movements, then 100 per cent equity allocation is fine.