As I had promised a few days earlier, this is a thread on portfolio diversification and allocation. Before I start, let me make it clear that this thread is for educational purposes only. Nothing contained within this thread must be construed as investment advice.

Before creating a portfolio we must ensure that we have an emergency fund worth at least 6 months living expenses along with adequate term life insurance and medical insurance in place.

When creating a long term investment portfolio we must ensure that we invest across asset classes in accordance with a well conceptualised and structured asset allocation strategy. The right allocation strategy depends on the individual's needs, risk profile and goals.

Young, unmarried individuals with no dependants: 80% equity, 10% debt and fixed income and 10% gold.

Married individuals without dependant kids and/or parents : 70% equity, 20% debt and fixed income, 10% gold.

Married individuals with dependant kids and/or parents : 40% equity, 50% debt and fixed income, 10% gold.

Retirees and senior citizens - 20% equity, 70% debt and fixed income, 10% gold

When we are young and unmarried we are most likely just entering the workforce with no major financial responsibilities. This allows us to allocate a major chunk of our portfolio to equities with minimal allocation to debt since we have a steady income and a number of years ahead

This offsets the high degree of risk that is inherent with equities. Those who are providing for dependant family members in such a situation may reduce their equity allocation by say 10% and allocate it to debt.

Those of us who are newly married without dependant kids and/or parents would still need to shoulder the additional responsibilities of a spouse. A slightly reduced equity allocation with a slightly increased allocation to debt would better align our portfolios to our needs.

Those of us who are married with dependant kids and/or parents need to balance the need for portfolio growth with the need to meet our current and future expenses. A balanced portfolio with near equal allocation to equity and debt would better align our portfolios to our needs.

When we retire, the focus should be more on protecting what we have built up rather than growing it further. Therefore our portfolios must be heavily skewed towards debt and fixed income products with minimal allocation to equity.

A constant allocation of not more than 10% to gold is also desirable. Gold acts as an insurance policy for our portfolios during periods of heightened inflation and widespread economic crises

Specific products would depend upon the individual's needs and risk profile. A few broad choices within each asset class :

Equity - Index funds, ETFs, and low beta dividend stocks

Debt and fixed income - FDs, debt mutual funds and liquid funds.

Gold - Gold funds and gold ETFs

That's that for this thread on portfolio diversification and allocation. Hope you enjoyed reading it.