Amid market fall, should you still maintain 30:70 debt-equity ratio, or re-visit it? Experts speak

Mint

06-08-2025

With benchmark indices - Nifty50 and S&P BSE Sensex - being down on Tuesday after a day of hiatus, stock markets closed lower in three of the past four sessions.
Because of Trump's tariffs, the Indian stock market is expected to stay rangebound in August, said Jashan Arora, Director at Master Trust Group, in a Livemint interview. He said that the markets will struggle to price in geopolitical risk, given Trump's volatile stance.
So, what should the investor's stance be at this stage? Is this the time to relook at the portfolio? Typically, investors are expected to maintain a debt-equity ratio at 30:70, which means keeping the value of equity mutual funds and other stocks at 70 percent ofthe total portfolio and that of debt assets at 30 percent.
In other words, if you maintain a 70:30 ratio, then a ₹ 1 crore portfolio will comprise ₹ 70 lakh as equity and ₹ 30 lakh as debt.
One might wonder whether the 70-30 rule is a fixed one, and investors should just stick to it. Experts do not believe it.
'Asset allocation should always be tactical and personalised, based on an investor's risk appetite, financial goals, and time horizon, not a fixed rule like 70:30 equity-to-debt,' said Yash Sedani, Assistant Vice President, Investment Strategy at 1 Finance.
'In the current market scenario, indiscriminately following such a static allocation may not serve every investor well. Different asset classes carry different levels of risk and respond differently to market cycles,' he adds.
He further recommends investors consult a qualified financial advisor who can assess whether their current allocation aligns with their personal financial situation and market outlook, instead of simply relying on a one-size-fits-all approach.
Experts also recommend that the asset allocation should not swing with headlines, and it should be built around an interplay of several factors, which include investors' financial goals, risk tolerance, and liquidity. And once decided, it should be reviewed from time to time.
'Asset allocation should not swing with headlines. Build it around objectives, risk tolerance, and liquidity, then review and rebalance at set intervals. Equities and debt remain the core as their returns do not always move together and they have a low correlation, which smooths outcomes over time,' said Feroze Azeez, Joint CEO, Anand Rathi Wealth Limited.
Another smart tip for investors is to decide debt-equity allocation based on time horizon. For example, equity allocation is supposed to be higher when the financial goal is far-fetched and lower when the goal is nearer.
'As a practical guide, for goals due in two to three years, a 70:30 mix between equity and debt balances growth with stability. For horizons beyond three years, an 80:20 mix can improve long-term compounding while keeping drawdowns manageable,' added Feroze Azeez of Anand Rathi Wealth.
He further recommends that investors should avoid single segment exposure within equity. 'You should spread exposure across market caps and styles. We believe a 55:20:25 split across large, mid, and small caps, complemented by strategy funds such as value and contra, helps reduce concentration risk and ensures the portfolio is not tied to the fortunes of any one segment,' he signed off.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie. We advise investors to check with certified experts before taking any investment decisions.
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