Managing Goal-based portfolio

In your personal finance journey, almost all the task will be one time like selecting insurance policy, tax planning, defining goals and needs monitoring once a year. But your portfolio should be monitored quarterly or even monthly.

Once you decide your financial goal and you ready to invest, you should look for an asset allocation process. Investing in only one asset class can ruin your portfolio.

Goal portfolio management is totally different from return based portfolio management

Goal-based portfolio management involves:

  • Reviewing financial goals
  • Review past returns and comparing with current investment returns
  • Any goals that can be achieved early?
  • Withdrawal of equity investment if the goal is to be fulfilled in less than 2 year
  • Whether a new asset class to be included in the portfolio?
  • When to do nothing with your portfolio

Asset allocation for goal-based Investing

Predefined percentage may be selected for the return based investing. But when you are investing for your goals asset allocation of individual goals matters and not overall portfolio asset allocation.

Let’s say you are planning to buy a 2nd house after 10 years. So, monthly you are investing Rs. 5000 for your goal. You are investing 60% in equity and 40% in debt.

Likewise, you have 5 other goals. So, you will have individual asset allocation for each goal.

  • For short term goals, keep 100% in debt.
  • For medium-term goal, 60:40 between equity and debt is a good idea
  • For long term goals 80: 20 can serve better.

This is just standard assumptions. As per your risk-taking capacity, you may have different asset allocation.

Remember that, planning is for achieving goal timely and without lot many fluctuations.

When to change debt-equity allocation?

When you start investing, equity allocation should be high.

As time passes and goal is near, the debt portion should be increased substantially.

For long term and medium-term goals, before 2 to 3 years, you should stay in debt only and all equity investment should be transferred to debt. Because as the goal is nearer, it is not advisable to let market fluctuate our investment amount. Else your goal will be delayed by 1 or 2 years.

For example

If you were planning to retire in 2008, and you have still kept 80% allocation in equity, your 50% corpus would have eroded. And your retirement plan will fail miserably. But if you have moved to debt investment 3 years ago, you can easily retire in 2008 without any risk to the corpus

If the goal is 10 years far, then following allocation can be better option:

  • 1-2 years- 100% equity allocation and 0% in debt.
  • 3-4 years- 80% in equity and 20% in debt.
  • 5-6 years- 60% in equity and 40% in debt.
  • 7-8 years- 40% in equity and 60% in debt.
  • 9-10 years- 0% in equity and 100% in debt.

Above allocation will protect downside risk of a portfolio.

Many permutations and combinations can be done. It is wise to conservative approach.

When to sell your investments

I will keep it to the point and simple.

  • If you are moving from one asset class to another asset class to maintain asset allocation
  • When your goal amount is achieved before time and moving to debt fund to avoid any risk
  • Liquidate funds invested for an emergency fund in case you are facing an emergency or unpredicted huge expense.
  • The goal is achieved and to fulfil it sell your investments.

edc6d5bbd2fa09b7d6842f5a0bbc38e8?s=96&d=mm&r=g - Managing Goal-based portfolio

Jigar Chavda

Passionate young guy for personal finance, wealth creation and marketing. He is following his dream and passion to be writer, speaker, blogger and advisor.


  1. Drashti Darji 1 Apr, 2020

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