Why do we need to go for portfolio adjustments with debt and gold when my investment horizon is more than seven years? Can't the portfolio be just 100 per cent equity?
Yes, if you are comfortable with it and don't have meaningful accumulation, you can well have 100 per cent allocation to equity. If you are starting an SIP of Rs 5,000 or Rs 10,000 today, you don't need to do asset allocation. You start worrying about your money or start having a far more regret, only once your money has grown to something meaningful. Assuming that you keep investing Rs 10,000 a month and after seven-eight years, it becomes around Rs 10 lakh, then when you see a 20 per cent decline in the market, your Rs 10 lakh becomes Rs 8 lakh. That is when you panic and get anxious.
To save you from that anxiety, you need asset allocation. Once you have accumulated something meaningful, you need to make your portfolio more stable to cushion from the market corrections. So, asset allocation is the way of methodically re-alligning or making your investment relatively more stable. But even then also, if you are comfortable with the sharp ups and downs in the market, you can very well have 100 per cent in equity.