60:40 Investment Rule- The 60:40 rule has been a well-known method in the world of investment for a long time. According to this rule, 60% of your total capital is invested in the stock market i.e. equity and 40% in bonds or fixed income instruments like debt funds. The purpose of this is that on one hand you get good returns in the long term, and on the other hand, some safe and stable income is also maintained. But the question is whether this formula will work even in today’s changing times?
Is the 60:40 rule of investment correct?
The 60:40 rule can still be a good starting point for investing, but its formula may be different for everyone. Flexibility and understanding are the most important factors in today’s world of investing. It is better to invest after understanding your needs and risk rather than blindly following a rule.
According to experts, this model is still useful, but in today’s time it would not be right for every investor to adopt it in the same way as it was earlier. There are rapid changes in the market, sometimes global crisis, sometimes technology boom and sometimes changes in interest rates. In such a situation, the thinking and priorities of investors have also changed.
According to Prasanna Pathak, Managing Partner at The Wealth Company, the returns on bonds are quite good now and the international stock markets are also at cheap valuations. Therefore, the 60:40 model can still be a strong base today. However, he also admitted that this model will not work for everyone as it is.
What do new age investors want?
Rahul Singh, equity head of Tata Asset Management, says that now young investors are not afraid of taking risks. They are investing in small-cap and thematic funds (such as AI, green energy) in search of fast returns. However, these funds can be quite volatile. Rahul advises that such investors should invest in balanced funds like flexi-cap or mid-large cap so that there is a balance between risk and return.
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