How much equity to hold in your portfolio? Experts explain age-wise retirement strategy

The right proportion of investments between growth and safety is needed in retirement planning, and it is considered vital to make the appropriate equity allocation based on the age and the time horizon of the individual.

In a discussion with Zee Business, Vikas Puri, Senior Partner at Complete Circle Capital, and Kirttan Shah, Founder & CEO at Truvanta Wealth, said that individuals working for 30-35 years need to prepare for their financial requirements, which may go up to 50-60 years, since they can potentially live for 80-85 years.

Start early to build a meaningful corpus

Add Zee Business as a Preferred Source

According to Puri, one should begin early, even with a small amount, as this can help one develop a substantial retirement savings account through the power of compounding. The rate of inflation, according to him, plays an important role in reducing purchasing power, as illustrated by his statement that an expenditure of Rs 60,000 per month could eventually reach the level of Rs 2–3 lakhs in future.

Furthermore, he pointed out that even a monthly SIP of Rs 10,000, for about 30 years on the assumption that one will earn 12 per cent annually, could possibly result in an accumulation of more than Rs 3 crores, indicating how small, consistent investments can build substantial wealth over time.

Equity is key to beating inflation

According to Puri, real returns matter more than nominal returns. He explained that if returns are around 10 per cent and inflation is 5–6 per cent, the real return is only about 4 per cent. Hence, a higher allocation to equity is necessary, especially when the investment horizon is long.

Age-wise equity strategy explained

Experts stressed that there is no one-size-fits-all rule, and allocations should be aligned with an individual’s risk appetite, financial goals, and time horizon.

In your 20s: Puri suggested that investors in their mid-20s can allocate 90 per cent or more to equity, given the long time horizon and ability to absorb volatility.

In your 30s: Puri recommended 70–80 per cent equity and 20–30 per cent debt. With 20–30 years remaining until retirement, equity should drive portfolio growth.

In your 40s: Puri advised 60–70 per cent equity and 30–40 per cent debt. While the time horizon reduces, staying too conservative can hurt long-term wealth creation.

In your 50s: Vikas Puri suggested a balanced mix of around 45–55 per cent equity, with the rest in debt. Focus shifts towards protecting the corpus while ensuring moderate growth.

At 60 or later: Even late starters should maintain 30–35 per cent equity exposure, according to Puri. He noted that since investments like NPS can continue till age 75–85, some equity exposure remains important.

How to adjust allocation over time?

Shah stressed that an investor should gradually decrease his investment in stocks as he gets closer to retirement.

• Aggressive investors, according to him, should keep their investment in equity at 70–80 per cent till age 55 and thereafter gradually shift to fixed income instruments.
• Moderate investors were advised to have a 50:50 ratio between equity and debt until they reach the age of 58, after which they should gradually decrease their investments in equity.
• For conservative investors, he advised opting for lifecycle funds, which automatically rebalance equity and debt based on age.

Role of NPS in retirement planning

Shah also stated that National Pension System (NPS) has become very appealing since it now permits high equity investment (upto 75 to100 per cent in certain schemes), in addition to tax advantages, along with automatic allocation of investments using lifecycle funds.

However, according to him, there was one drawback associated with NPS as well because upon maturity, although one may withdraw up to 60 per cent of the accumulated amount tax free, but at least 20 per cent had to be invested in an annuity, which provides relatively lower returns.

Key takeaways for investors

Both experts agree that:

• Starting early is crucial
• Equity should form the core of long-term retirement planning
• Asset allocation must evolve with age, risk profile, and financial goals

As Puri summed up, maintaining the right balance between growth (equity) and stability (debt), while staying invested for the long term, is the most effective way to build a retirement corpus that can withstand inflation and support financial independence.