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The Best Asset Allocation Strategy for Indian Investors | Real Back Tested Models You Can Trust
Sep 12, 2025
📌 Are we blindly following Western financial advice that doesn't work in India? In this eye-opening video, we break down Capitalmind’s brilliant research on asset allocation strategies built specifically for Indian investors, backed by real Indian market data. 📌 What’s inside: Why standard advice like "100 minus age" or “5% gold” may not apply to Indian investors The flaws in cookie-cutter financial advice (Conservative, Moderate, Aggressive) How Indian markets differ from the US – and why it matters Deep dive into 6 back tested asset allocation models Which model performs best across different market cycles (2008 crash, COVID crash, bull runs) Which strategy is right for YOU based on your risk profile 📊 This is one of the most practical and data-driven guides to asset allocation you’ll find tailored to Indian investors. Read full article and download python code from our community website: https://fabtrader.in/what-is-the-ideal-asset-allocation-for-indian-investors/ You can become a member and support FabTrader. Join now to get access to perks! https://www.youtube.com/channel/UCzlhrwsPRp1FCt1-cAIDqBA/join 💬 Have questions? Drop a comment below! If you found this useful, Like 👍, Share 📢, and Subscribe 🔔 for more Python and trading-related content! 🚀
View Video Transcript
0:00
You've heard it all before, right? Your
0:02
equity allocation should be 100 minus
0:03
your age gold. Keep it to 5% of your
0:06
portfolio tops. Higher the return, the
0:08
higher the risk you need to take. This
0:10
is the the kind of investment advice
0:11
we've all grown up with. Uh it's been
0:12
repeated in books, shared in forums, and
0:14
handed down as as gospels by
0:16
self-proclaimed experts. But here's the
0:18
uncomfortable truth. Most of this advice
0:20
has absolutely nothing to do with the
0:21
Indian market. So the question is where
0:23
did these rules come from? They largely
0:25
borrowed from western models rooted in
0:26
data from the US mostly copied from
0:29
legends like the the Benjamin Graham,
0:30
Peter Lynch or Warren Buffet. While
0:33
their principles are sound and they are
0:34
primarily addressing the US audience,
0:36
their risk profiles, their tax laws, the
0:37
the currency stability that they have
0:39
that is all very US specific. But we are
0:41
not in the US. So here's the real
0:42
question. Should Indian investors be
0:44
following advice designed for an
0:45
entirely different financial ecosystem.
0:47
Let's break this down a bit. Right? The
0:48
the S&P 500 has been around since 1957.
0:50
And the India's nifty50 as you know was
0:52
formerly launched only in 1996. The US
0:55
market cap is over 50 trillion whereas
0:56
India's is roughly 4 trillion which is
0:58
less than 10% of its size. The US equity
1:00
ownership is deeply institutional. In
1:02
India the retail participation has just
1:03
picked up steam in the last 5 years. So
1:05
if we copy paste UScentric asset
1:06
allocation models into our Indian
1:08
portfolios without questioning them we
1:09
risk building a financial house on a
1:11
completely wrong foundation. Now ask
1:13
yourself has there been any serious
1:14
India based research that tells us what
1:16
asset allocation actually works here?
1:18
back tested with Indian data spanning
1:19
real economic cycles reflecting Indian
1:20
investor behavior. Well, the good news
1:22
is there is one team has done the heavy
1:24
lifting and they've done it right. The
1:26
good folks at Capital Mind have
1:27
conducted a fantastic multi-deade back
1:29
test using Indian market data to find
1:30
out which asset allocation model
1:32
actually delivers not in theory but in
1:34
practice. In this video, I'm going to
1:36
break down the key findings from this
1:37
research, walk you through different
1:39
asset allocation models they tested,
1:40
compare their historical performance in
1:42
terms of returns, risk, draw downs, and
1:44
volatility, and finally show you which
1:46
model came out on the top and why this
1:48
could change the way you think about
1:49
building your wealth. So, if you've ever
1:51
asked yourself what is the right
1:52
allocation strategy for me as an Indian
1:53
investor, this video probably is going
1:55
to be a total eye opener. So, let's get
1:56
started.
1:59
The content trade in this video is based
2:00
on my personal experience and is meant
2:01
purely for education and information
2:02
purposes. It is not financial
2:03
investment, tax or legal advice and
2:04
should not be considered a
2:05
recommendation to buy, sell or hold any
2:06
financial instruments. Please remember
2:07
that investing in training involves
2:08
significant risk of loss and past
2:10
performance is not indicative of future
2:11
results. Always do your own research and
2:12
consult with a qualified financial tax
2:14
and legal professional before making any
2:15
financial decision. Now, let me ask you
2:17
this. Have you ever walked into a
2:18
financial planner's office and filled
2:19
out one of those online risk profile
2:21
forms? Chances are within minutes you're
2:23
slotted into one of these three magical
2:24
buckets. The conservative, moderate, and
2:27
aggressive. But here's the problem,
2:29
right? Most of the time this
2:30
categorization is done without any real
2:31
understanding of you, your actual goals,
2:33
your your life situation or even how you
2:35
emotionally handle market volatility.
2:37
You're just labeled. You hear uh things
2:39
like, "Oh, you're 50 then you must be
2:41
conservative." Oh, you've just started
2:42
your career, you should be aggressive.
2:44
You want to retire in 10 years, so so
2:45
let's make it moderate, right? Why?
2:47
Where's the data behind this? Invey,
2:52
vague, and dangerously oversimplified.
2:54
And more importantly, they are recycled
2:55
from western financial planning
2:56
templates. they may have zero relevance
2:58
to us which is Indian investors because
3:00
just think about it right a 50-year-old
3:02
in the US might have access to social
3:03
security his 401ks employee matched
3:06
retirement plan and a fully functional
3:07
you know health insurance system but
3:09
what about a 50-year-old in India
3:11
probably still supporting family maybe
3:12
paying off a home loan juggling rising
3:14
health cost and planning for the kids
3:16
weddings so it's the same age but
3:18
radically different financial realities
3:19
so should they both be classified
3:21
conservative just because they share a
3:22
birth year of course not right this is
3:24
how so many portfolios are constructed
3:26
in India using templates that don't
3:27
think, don't question, and definitely
3:29
don't fit, right? And and here's the
3:31
kicker. Once you're boxed into one of
3:32
these categories, your entire allocation
3:34
gets dictated by it. Uh you might be
3:36
told, hey, since you're conservative, uh
3:37
we'll keep you 80% in debt and 10% in
3:40
gold and 10% in equity. Boom. If your
3:42
wealth strategy is already set, but
3:44
based on what a birthday and a cut fee,
3:46
if you personally ask me, that's not
3:47
advice. That's just guessing, right? And
3:48
in a market as complex and fast evolving
3:50
as India, guessing can be very
3:51
expensive. So what we actually need
3:53
instead uh is advice that's number one
3:56
evidence-based number two backed by real
3:58
Indian data and number three tested
4:00
across multiple market cycles and that's
4:02
exactly where the capital mind research
4:04
changes the game. The capital mind
4:06
research has considered uh you know data
4:07
going back up to 30 years. Uh to keep
4:09
the overall research a bit simple and
4:10
straightforward. They've considered only
4:12
four asset classes which is domestic
4:13
equity which is Indian uh stock market.
4:15
Uh for the debt they've considered bonds
4:16
and fds uh gold primarily as a hedge and
4:19
finally US securities as well. So that
4:20
it gives you that global
4:21
diversification. So what they've done is
4:23
they've built actually six asset class
4:25
models starting with the the first one
4:27
called the token. Uh this is where you
4:29
know you're heavy on Indian uh equity.
4:30
So 70% of this is in India equity, 10%
4:33
on debt, 10% on gold and 10% on uh US
4:35
equities. The next one is called the
4:38
textbook. Uh this is the textbook
4:39
allocation of say 50% on Indian
4:41
equities, 20% debt, 10% gold and 20% on
4:43
US equities. The third one being the
4:45
safety first which is a very
4:46
conservative portfolio of only 40% in
4:48
the Indian equities 50% debt uh 10% gold
4:51
and you have zero allocation for the US
4:52
equities
4:54
and the the standard equal allocation
4:56
which is the 25% across all four
4:58
categories. Uh the goldfinger I'm I was
5:00
surprised as to why they considered this
5:02
because this is 50% uh domestic equity
5:03
and 50% gold and uh nothing else on debt
5:06
or US equities. And finally the stars
5:08
and stripes as the name suggests it's
5:10
50% on Indian equity and 50% directly on
5:12
US equity. And in addition to these six,
5:14
they've also considered a seventh model
5:15
which is the nifty model which assumes
5:17
that you know you invest 100% of your
5:19
allocation into domestic equities. So
5:21
they've taken these seven models and
5:22
then back tested it for 30 years and
5:24
this is how these models performed. I
5:26
think a couple of surprises here. The
5:27
first one the stars and stripes came out
5:29
on the top overall with about 16%. And
5:31
the second big surprise is the
5:32
goldfinger. I personally did not expect
5:34
this to come second in the list which is
5:35
the 50% gold. If you remember 50% gold
5:37
and 50% Indian market that came as the
5:39
second and the other four which is
5:41
namely textbook nifty token and equal
5:42
pretty much all around the 14% mar and
5:44
safety first which is the most
5:45
conservative model which which was very
5:47
debt heavy came at the last with about
5:49
12.3% overall well the returns is only
5:51
part of the story right you I'm I'm sure
5:52
you definitely want to know how volatile
5:54
these models were and and that's where
5:56
we go into volatility now next
5:59
uh again uh no surprise here or no marks
6:01
for guessing the the least uh model that
6:04
had the least draw down is the safety
6:05
first quite understandably and equal as
6:07
well and then textbook and token pretty
6:09
much around the same category there and
6:12
if you consider the goldfinger the nifty
6:14
only portfolio and the star and stripes
6:15
they all pretty had very steep draw
6:17
downs so so we've looked at the uh you
6:19
know the overall returns we've also
6:20
looked at the the draw down data let's
6:22
slice this up even a little better now
6:24
uh and then we look at the analyzed uh
6:26
returns by allocation strategy so
6:27
they've given the data for 1 3 5 10 and
6:29
15 years so if you consider short-term
6:31
being like you know 3 years midterm
6:32
being 10 5 years and then the long-term
6:34
being 15 years uh if you look at one to
6:36
three years equal weightage portfolio
6:38
has given you know much much better
6:39
returns of what 18.3 but this really
6:41
being short-term you know can't pay a
6:43
lot of you know we can't put a lot of
6:44
weightage to this one if you look at the
6:46
the medium-term um star and stripes
6:48
seems to have done slightly better than
6:49
equal weightage but if you take the
6:51
long-term it's quite interesting pretty
6:52
much all of it at around the same you
6:55
know uh levels only with the star
6:57
stripes being slightly better I mean it
6:58
has got a couple of points above the
7:00
rest of the ones that's an interesting
7:02
observation because you know what this
7:03
tells us which people have always been
7:04
telling in the long term it doesn't
7:06
really matter as long as you're
7:07
consistently investing uh just one or
7:09
two points here or there but otherwise
7:10
if you really see uh you know the
7:11
overall returns doesn't really matter
7:14
I'm sure you have this question in your
7:15
mind what's the final verdict right
7:16
what's the conclusion of all this study
7:18
uh right
7:20
so what the study did is they considered
7:22
three main factors which is the growth
7:23
stability and diversification and they
7:25
put a score across uh you know all seven
7:27
models that they considered and then
7:29
what they concluded was the textbook
7:31
style which is 50% domestic equity 20%
7:33
debt 10% gold and 20% US equity uh gave
7:36
the most optimum performance across all
7:38
three factors. Personally, this is the
7:39
model that I'm currently following. Uh
7:41
although I'm I'm going a little light on
7:42
US equity going forward uh because I I
7:44
feel that the overall edge there is is
7:46
lost. Uh so I'm going a bit conservative
7:48
on that. But overall, I'm I'm basically
7:50
sticking to this model for quite some
7:51
time now. But if you are somebody who's
7:53
very aggressive, uh the model also
7:54
suggests that the stars and strikes
7:56
which is 50% domestic and 50% US equity
7:58
could be the one because as we saw it
7:59
gave you a clear edge of about 2 to 3%
8:01
more than all of the the other six
8:03
models. Uh but how about the draw down
8:05
as you saw was close to about 60%. So if
8:07
if you are somebody who's kind of okay
8:09
with that kind of draw down volatility
8:11
uh you know for those aggressive
8:12
investors sass and stripes uh is is what
8:14
is recommended and for the select few uh
8:16
who are very conservative who can't
8:18
stand a lot of volatility uh you know
8:19
the equal weight as we saw uh was was
8:21
only about two two points down from the
8:23
the highest returns but that delivered
8:26
that kind of returns with half the draw
8:27
down as the stars and stripes. So this
8:29
is definitely not a bad choice at all
8:31
and that was the conclusion of that
8:32
study. Uh given these conclusions were
8:34
data backed it gives us better
8:35
confidence and peace of mind. Let me
8:36
know what you think of the study and
8:37
whether you agree with its findings. I'm
8:39
sure some of you have different views
8:41
and I would love to hear that. So,
8:42
please put those in the comments. That's
8:43
all I had for this video. Hope you like
8:45
this content. I'll see you soon on
8:46
another one. Until then, stay safe, stay
8:47
happy. Thank you. If you genuinely found
8:49
this video useful, please consider
8:50
subscribing and liking the video. And I
8:52
will see you soon on another video. And
8:53
until then, take care and happy trading.
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