A better approach is asset allocation—spreading your money across different types of investments like stocks, bonds, gold, and real estate, based on your goals, age, income, and risk tolerance. For example, a 35-year-old might keep 70 percent in stocks and 30 percent in bonds. A 60-year-old might do the opposite to reduce big ups and downs. This method helps your money grow while lowering the chance of large losses.
Why it works better than timing
Markets go up and down in the short term. If you try to guess the right time to buy or sell, you’ll often get it wrong. Asset allocation softens the impact—if stocks fall, your bonds or gold might hold steady or even rise. Regularly rebalancing (adjusting your portfolio back to your original mix) helps you lock in gains from better-performing assets and invest in the ones that are lagging.
Example:
Investor A puts Rs 10 lakh into equity mutual funds in January 2021 and holds until 2025. Despite market swings, they earn about 12 percent annual returns. Investor B tries to time the market, exits in 2022 expecting a crash, misses the rally, and ends up with only 8%. Another investor with 50 percent stocks, 30 percent bonds, and 20 percent gold makes 10 percent with less risk and more peace of mind.
Rule of thumb:
Use “100 minus your age” as the percentage of your portfolio in stocks. Review and rebalance at least once a year. Use SIPs to invest steadily, and don’t change your allocation just because the market is up or down.
