Overview
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Inflation erodes real returns. The goal is to construct a practical, diversified mix that stays ahead of inflation after taxes and costs.
Step 1: Establish an Inflation Baseline
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Track CPI trends and personal inflation (housing, education, healthcare).
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Use a conservative planning rate (e.g., 5–6% long-term) for projections.
Step 2: Asset Mix Principles
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Diversification across growth (equity) and stability/inflation hedges (T-bills, short-duration debt, gold).
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Tax efficiency via long-term holding periods and wrappers (NPS, PPF).
Step 3: Core Portfolio
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50–70% Equity (risk tolerance dependent):
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Broad-market index funds and flexi-cap exposure.
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Optional: international equity via FoFs for currency diversification.
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20–40% Fixed Income:
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Short-duration debt funds, SDLs/G-secs via RBI Retail Direct, laddered FDs.
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5–10% Gold:
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Sovereign Gold Bonds (SGBs) or ETFs.
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Optional: 0–5% REITs/InvITs for income and diversification.
Step 4: Cash Management
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Keep 3–6 months expenses in liquid avenues.
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Sweep FDs for idle balances.
Step 5: Rebalancing
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Annual or threshold-based (5–10% band).
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Use new contributions to correct drift.
Step 6: Tactics for High-Inflation Spikes
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Temporarily tilt to short-duration debt and T-bills.
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Avoid locking long-duration at poor real yields.
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Maintain SIPs in equity to benefit from volatility.
Step 7: Taxes and Costs
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Prefer direct plans; watch TERs.
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Consider post-tax, post-inflation returns in decisions.
Step 8: Behavior
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Automate; avoid news-driven churn.
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Keep a rules-based IPS visible.
Sample Model Portfolios
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Conservative: 40% equity, 45% fixed income, 10% gold, 5% cash.
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Balanced: 60% equity, 30% fixed income, 7% gold, 3% cash.
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Growth: 75% equity, 15% fixed income, 7% gold, 3% cash.
Call to Action
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Try our inflation-adjusted goal calculator. For portfolio reviews, schedule a 20-minute audit.
