The Right Way to Allocate Your Portfolio
- Rajasekar Maruthasalam
- 15 hours ago
- 3 min read
“Return comes from stock selection. Stability comes from allocation.”
Introduction
Every day, we review portfolios. One common mistake we see is incorrect allocation. Many investors focus only on buying good stocks, but ignore how much money they put in each stock.
This small mistake can reduce returns and increase risk.
What Is Weightage?
Weightage means the percentage of total portfolio invested in one stock.
Example: If your total portfolio is ₹10,00,000, then 2% weightage means ₹20,000 in one stock.
Simple rule: Allocation decides risk.
The Ideal Stock Allocation Rule
Invest 2% of total capital in one stock.
This keeps your portfolio balanced.
If you have extra money, do not over-allocate to one stock.
Park excess funds in LiquidBees, a liquid ETF that invests in short-term government and money market instruments. It helps you earn small returns while keeping money safe and available for future opportunities.
Industry Allocation Rule
Do not allocate more than 8% to one specific industry.
If one sector faces regulation change, slowdown, or policy issues, all stocks in that sector can fall together.
Limiting exposure protects your portfolio from sector-level shocks.
Capital-Based Investment Strategy
Your strategy should change based on your total capital.
If Capital Is Below ₹2 Lacs
Invest only in Mutual Funds. Avoid direct stocks.
Reason:
With small capital, diversification is difficult.
If you buy 2–3 stocks and one falls 20%, your portfolio will suffer badly.
Mutual funds give:
• Instant diversification
• Professional management
• Lower risk
• Better stability
At this stage, focus on capital protection and steady growth.
If Capital Is ₹2 to ₹10 Lacs
Invest in equities, but choose low-risk and low-volatile stocks only.
Reason:
Your capital is growing, but still limited.
High-risk stocks can create large swings in portfolio value.
Low-volatility companies:
• Have stable earnings
• Strong balance sheets
• Consistent demand
At this level, priority is stability with moderate growth.
If Capital Is Above ₹10 Lacs
Start adding high-growth stocks.
Reason:
Now your portfolio is strong enough to absorb short-term volatility.
You can allocate:
• Core stable stocks (major portion)
• Some portion in high-growth companies
Growth stocks can increase returns, but they come with higher volatility.
At this stage, you can manage both risk and opportunity.
If Capital Is Above ₹20 Lacs
Start investing in US stocks.
Reason:
Geographical diversification red
uces country risk.
If Indian markets face slowdown, US markets may perform differently.
Benefits:
• Access to global leaders
• Dollar exposure
• Reduced dependence on one economy
This adds another layer of protection and growth.
If Capital Is Above ₹25 Lacs
You may consider small allocation to crypto.
Reason:
Crypto is highly volatile and risky.
Only when your core portfolio is strong and diversified should you consider alternative assets.
Keep allocation very small.
It should not disturb your main portfolio.
Final Thought
“Your investment strategy should grow as your capital grows.”
Small capital needs protection.
Medium capital needs stability.
Large capital needs diversification.
Very large capital needs global exposure and alternatives.
Right allocation is more important than chasing returns.
If you need help structuring your portfolio properly, feel free to connect.
Build With Structure, Not Emotion
Stock selection gives return.
Allocation gives stability.
Most investors ignore this simple truth.
If you want to learn proper portfolio structuring, join here:
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Learning or investing — both options are available.
Choose what fits your time, comfort, and goals.
