Overview

• 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

• Track CPI trends and personal inflation (housing, education, healthcare).

• Use a conservative planning rate (e.g., 5–6% long-term) for projections.

Step 2: Asset Mix Principles

• Diversification across growth (equity) and stability/inflation hedges (T-bills, short-duration debt, gold).

• Tax efficiency via long-term holding periods and wrappers (NPS, PPF).

Step 3: Core Portfolio

• 50–70% Equity (risk tolerance dependent):

  • Broad-market index funds and flexi-cap exposure.

  • Optional: international equity via FoFs for currency diversification.

• 20–40% Fixed Income:

  • Short-duration debt funds, SDLs/G-secs via RBI Retail Direct, laddered FDs.

• 5–10% Gold:

  • Sovereign Gold Bonds (SGBs) or ETFs.

• Optional: 0–5% REITs/InvITs for income and diversification.

Step 4: Cash Management

• Keep 3–6 months expenses in liquid avenues.

• Sweep FDs for idle balances.

Step 5: Rebalancing

• Annual or threshold-based (5–10% band).

• Use new contributions to correct drift.

Step 6: Tactics for High-Inflation Spikes

• Temporarily tilt to short-duration debt and T-bills.

• Avoid locking long-duration at poor real yields.

• Maintain SIPs in equity to benefit from volatility.

Step 7: Taxes and Costs

• Prefer direct plans; watch TERs.

• Consider post-tax, post-inflation returns in decisions.

Step 8: Behavior

• Automate; avoid news-driven churn.

• Keep a rules-based IPS visible.

Sample Model Portfolios

• Conservative: 40% equity, 45% fixed income, 10% gold, 5% cash.

• Balanced: 60% equity, 30% fixed income, 7% gold, 3% cash.

• Growth: 75% equity, 15% fixed income, 7% gold, 3% cash.

Call to Action

• Try our inflation-adjusted goal calculator. For portfolio reviews, schedule a 20-minute audit.