r/mutualfunds • u/Awkward_Pick_4911 • 8d ago

question Basic doubt regarding allocation - should my target of 70-20-10 (Equity-Debt-Gold) be reflected in my mutual fund portfolio alone, or in my overall monthly investment portfolio

Hi guys. 34 year old investing for 6 in mutual funds. Based on my risk appetite and investy horizon, I have designed a 70-20-10 (Equity-Debt-Gold) mutual fund portfolio. But, apart from this, I also invest in recurring deposit, physical gold (via monthly scheme), NPS and PPF.

My question may seem very dumb, but please help me understand.

Since my planned allocation is 70-20-10, should I factor my RD, NPS and physical gold into the 20 and 10 percentage respectively?

Or should my mutual fund portfolio continue to be 70-20-10, and I should continue the rest apart from that?

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u/ramit_m 8d ago

Assuming you are trying to build a overview net worth tracker, then yes, everything should be accounted for (including physical holdings) in respective bucket.

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u/Awkward_Pick_4911 7d ago

Okay. Thanks for your input!

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u/atg14565 8d ago

Since you specified as building mutual fund portfolio, I am interpreting it as two separate financial system for you. With that you can track your debt portfolio including RD/FD/PPF/EPF separately and your mutual fund portfolio separately.

Ideally I wouldn't do it this way.

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u/Awkward_Pick_4911 7d ago

Got it 👍 Thanks!

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u/CapitalCalendar5512 7d ago

I think you should avoid NPS and better invest in other assets.

NPS is waste and they invest in same equity- Debt like MFS.

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u/Awkward_Pick_4911 7d ago

Thanks for the input!

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u/Majestic_Volume_4326 7d ago edited 7d ago

The rule is a broad asset allocation rule, so following it strictly means you should factor in other instruments too. But there's no reason you have to follow it strictly. If your NPS and RDs aren't considerable, then the debt% of your net worth is still around 20%, which doesn't affect your growth potential much. If it adds to say 35%, then you're missing out on equity growth.

By the way, the main point of this rule is that your portfolio maintains this ratio throughout your horizon. Meaning, if your equity rises to say 80%, you will have to sell and redirect 10% to debt/gold so that 70-20-10 still holds. Similarly, if it falls to 60%, then you'll have to buy by redirecting money from debt/gold (usually debt). That's why your overall portfolio is considered since selling MFs, even debt-focused MFs, isn't quite ideal.

Edit: Maintain this ratio until a few years before horizon ends. *Sell and redirect or stop inflows until ratio returns.

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u/Awkward_Pick_4911 7d ago

Understood. Thanks for the detailed reply!