Portfolio allocation should always be aligned with an individual’s risk-reward profile, goals.
Go all in or wait for more cues — investors face a dilemma amid across-the-board correction in the Indian market. From deciding on stock picks, choosing systematic investment plans (SIPs) or a lump-sum push to battling the debt or equity fund choices – investors have a lot to think about as US President Donald Trump shakes the way the world does business.
Investors’ portfolios have taken a beating, as the market has been in a downward spiral in the new year. Since the start of 2025, the benchmark Nifty50 is down 2.87 percent, Nifty Midcap150 10.57 percent and Nifty smallcap250 has crashed 16.75 percent.
Market corrections can expose vulnerabilities in a portfolio such as overexposure to high-volatility stocks or sectors. A review of holdings helps ensure that asset allocation aligns with your risk tolerance and financial goals.
Your goals, your investment horizon
If your portfolio has seen a fair bit of gains over the past three or four years but you are still not able to digest the current volatility, it’s better to reduce risk in your portfolio.
Portfolio allocation should always be aligned with an individual’s risk-reward profile, goals, and investment horizon — regardless of the current market sentiment.
While the broader mood suggests moderation and tempered return expectations, it’s essential not to make impulsive shifts like reducing equity exposure or increasing fixed-income holdings purely based on market conditions.
“For someone with Rs 10 lakh to invest, the focus should remain on their personal risk appetite. Given the recent market correction, this could be an opportunity to allocate a fair share towards equities. However, the core strategy must still reflect the investor’s long-term goals and risk tolerance rather than short-term market movements,” said Santosh Joseph, co-founder and CEO, Germinate Investor Services.
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SIPs vs lump-sum
With the correction in the market, valuations of different segments have moderated. Does this warrant a lump-sum investment or a staggered strategy in the form of SIPs?
Karan Aggarwal, Chief Investment Officer at Elever, a wealth-tech PMS, advised investors to park Rs 10 lakh in a floating rate fund with a Systematic Transfer Plan (STP) of Rs 50,000 a month. “The next 12-18 months can be quite turbulent and gradual deployment would protect investors against volatility spikes,” he said.
SIPs help mitigate the impact of market fluctuations through rupee cost averaging, ensuring disciplined and consistent investing. At the same time, retaining some liquidity allows investors to capitalise on potential market corrections.
Aggarwal suggested SIPs across gold funds, global funds, largecap funds and midcap funds.
“Gold and international equity provide suitable diversification benefits as both display significantly low or negative correlation with the Nifty50 index. Largecap and midcap exposure are given through index funds, as it takes manager-selection risk out of the picture as nearly 50 percent midcap and largecap mutual funds underperform their respective benchmark,” Aggarwal said.
Funds to pick
According to Yash Sedani, assistant vice president, investment strategy at 1 Finance, if an individual has Rs 10 lakh to invest, she should focus on overall portfolio allocation rather than allocating the entire amount to a single asset class.
Sedani suggested flexi-cap and passive index funds in equity segments. He also recommended diversification via debt mutual funds, gold funds and Real Estate Investment Trusts (REITs).
Aggarwal favoured a portfolio split — largecap 30 percent, midcap 20 percent, factor funds 10 percent, gold 10 percent, US equity 10 percent and floating rate fund 20 percent.
The choice of fund categories should always be determined by the portfolio you design based on your risk appetite and investment horizon.
“If your portfolio requires exposure to hybrid funds, options like Balanced Advantage Funds (BAF) or Multi-Asset Funds can be suitable. Alternatively, if you prefer building your mix of equities and fixed income, carefully choose categories within each asset class that align with your strategy,” Joseph said.
It’s important to make these choices prudently — don’t chase returns or follow trends blindly. Focus on constructing a robust portfolio that fits your needs.