Key Points
Debt and Equity have a low correlation and a combination of these two assets can help target a return around 12% based on your investment horizon..
Equity mutual funds have delivered an average return of 14% over a longer tenure and Debt mutual funds have approximately delivered a 7% return...
Chirag Muni: As I said the long-term return has been 12-14% on the Nifty, but you have to live through those years to make your 12-13% return, and many times if you see large volatility, people tend to come out of equities and do not enjoy their return because on a 10-year basis there will always be two-three-year cycle which will disappoint you in Nifty..
So, if you have 50-65% into equity and if let us say market drops also which I said that in the long-term it does not drop so much, but assuming even the market drops 30-40%, your 65% might come down but the rest of the debt portion will make up for it in a three, three-and-a-half, four-year scenario..
And if you have, of course, a five-year horizon, then I would say 80% equity and 20% debt because I said in a five-year scenario, there is an 86% chance you will make more than debt in any case..
