Why 15% return is great but may not be good enough for you

I was doom-scrolling through social media last night when I saw it again—another screenshot of someone's investment portfolio showing a 15.3 per cent XIRR (a financial metric used to calculate an investment's return). The comments were predictable: "Amazing returns!" "Which funds?" "You're crushing it!"

And I get it. Who doesn't love seeing double-digit returns? I'd be lying if I said I don't get a little rush when my portfolio is in the green.

But something about these posts always bugs me.

When I look closer at these screenshots, it's always the same story—large-cap funds, mid-cap funds, small-cap funds and even some aggressive sectoral bets. All pure equity funds across the board.

And I think to myself: are these returns just on the basis of riding a bull market?

Your return percentage doesn't tell me how well you sleep

Bragging about high returns in a bull market is like boasting about your swimming skills in a calm pool. The real test comes when you're facing choppy waters and headwinds.

I've seen too many investors learn this the hard way. Their impressive returns disappeared when they had to withdraw money during a market downturn—whether for a medical emergency, a job loss or even a planned expense like a home down payment.

That's when the true value of a balanced portfolio becomes clear. Not when markets are soaring but when they stumble.

What those screenshots don't show

1) Where's the emergency fund?

The most dangerous words in investing aren't "this time it's different". They are: "I can always sell some investments if I need cash".

That strategy works fine until it doesn't. Markets have an uncanny ability to crash just when you need money the most—when the economy is struggling and jobs are on the line.

What I do differently:
I keep 6-8 months of expenses in a liquid fund, accessible at any time. It might not get me the highest returns, but it lets me sleep at night, knowing I won't have to sell my equity investments if life throws a curveball.

2) Where's the asset allocation?

Having 100 per cent of your money in equities feels amazing during a bull run. Your portfolio grows faster than everyone else's, and those screenshots look mighty impressive.

But when the market corrects—and it always does—that same allocation turns into a nightmare. A 20 per cent drop in the market means a substantial drop in your entire portfolio. Most investors only realise this after the damage is done.

What I do differently:
I keep some allocation in debt—not for returns, but for stability. Hybrid funds, like aggressive hybrid funds, can be a good option as they invest in a mix of both equity and debt.

I also rebalance my portfolio periodically—selling assets that have grown beyond their target allocation and buying more of those that have fallen below—which helps maintain the right mix of assets. It makes you sell high, buy low and keep your risk in check. Yes, it drags down my returns during bull markets. But that allocation has kept my portfolio steady through turbulent markets.

3) What about your short-term goals?

One of the biggest mistakes I see in those portfolio screenshots is the complete disregard for time horizons. Not every rupee in your portfolio should be treated the same way.

The money you'll need in the next 1-3 years doesn't belong in equity funds, no matter how good the returns look. Equity is volatile in the short term, and the risk of a market crash just before you need the funds is too high.

What I do differently:
I've structured my investments based on when I'll need the money:

• Short-term needs (1-3 years): Primarily debt funds (short-duration funds, for example)
  
• Medium-term goals (3-5 years): Hybrid funds, primarily conservative hybrid funds or equity savings funds
  
• Long-term wealth building (5+ years): More aggressive equity exposure

This approach might not generate the highest possible returns, but it ensures I won't be forced to sell at a loss when I actually need the money.

The returns no one talks about

During a recent market correction, my portfolio was down about 7 per cent, while the broader market dropped nearly 15 per cent. Not exactly screenshot-worthy, but exactly what my asset allocation was designed to do.

No one posts screenshots in a bear market. No one shares negative returns. And no one admits they had to sell at a loss because they needed cash.

Those flashy portfolio screenshots remind me of T20 cricket. It's all about hitting sixes and fours in every over—exciting to watch but risky. Smart investors play more like Test cricket. Steady, calculated and built for the long game.

The real flex isn't having the highest returns in a bull market. It's building a portfolio that can weather any storm and still meet your actual life needs. So, the next time you see an impressive return, ask yourself: is it built for the next crash or just the last rally?

Also read: How to grow your money 200% in just 7 years

This article was originally published on March 28, 2025.